What is the true cost of your 401(k) plan?
Over the last two decades, the number of 401(k) investment options available to employees has grown, and there are now more options available than ever. As more and more employees invest in their futures through 401(k) plans, plan participants are urged to consider and compare fees and expenses among different plan options.
Participants in a 401(k) plan should consider how fees and expenses could affect their investment returns and their ability to replace their income after retirement. One of the keys to securing their future or current retirement is to compare the costs of different 401(k) options. What may appear to be a less expensive 401(k) option could actually end up being more expensive depending on the fees and expenses that are charged for participation. For example, over 30 years, an investor who saves $2,500 a year and earns a 10% return each year would reap $411,120, but annual fees of just 0.25% would eat up $18,977 of that return.
The Trustees of employee benefit plans have a fiduciary duty to ensure that plan investment options are prudently selected to ensure that fees and expenses are fair. Plan participants could take this approach one step further by requesting fee and expense information from their 401(k) provider.
The 401(k) Summary Plan Description (SPD) may include the fees and expenses paid by the plan, how plan administration expenses are distributed among plan participants, and whether different investment options are available. New employees must receive a copy of the latest Summary Plan Description within 90 days after becoming covered by the plan. Plan participants may also request a copy of their plan’s SPD from the plan administrator.
For more information, please contact your Trust Fund counsel.
By Kristina Zinnen and Carlos Isidro | July 30, 2014