There fees that matter and fees that don't matter. If one recordkeeper charges twice as much as another recorder, does that fee matter? This is a trick question. If the service (remember, that's the other thing that needs to be disclosed) justifies the higher fee, than the higher fee doesn't matter. Of course, the quality of service can't be disclosed, it can only be experienced. If the stated services between the two recordkeepers are the same but the quality of the low-cost alternative is extremely poor, then, again, the higher fee doesn't matter.

It is this focus – or, specifically, the lack thereof – on quality that might prove the Achilles' Heel of 408(b)(2). It'll be too tempting to just look at the number generated by the fee disclosure. Indeed, it's almost guaranteed some vendors will try to sell their service based on lower fees. Remember, such a sales strategy only works for commoditized products and, right now, the only commoditized products are index funds. There is no real difference between two S&P 500 index funds. Both should be managed in the same manner and yield the same return, so the only difference will be the fee. In this case, the fees do matter. (One can argue custody and recordkeeping should also be considered a commodity, but there's too large a service component in both those activities to justify placing a "commodity" label on them.)

But here's the potential pitfall. There's a lot of emphasis on the categorizing mutual fund expense ratios as "fees." We all know equity-based mutual funds have much higher expense ratios than bond-based mutual funds. A quick and dirty method for lowering overall 401(k) fees is to move all the assets to lower cost bond-based mutual funds. But we also know (and one of the reasons why the 2006 Pension Protection Act was drafted the way it was) the best long-term investment remains equities, not bonds.

In cutting fees, will 401(k) plan sponsors accidentally cut off their nose to spite their face?