For years, far too many 401(k) plan sponsors took a merely casual approach when it came to fees. A few of them may have even believed they weren't paying any fees. As of July 1, 2012, this laissez faire attitude became history, as 401(k) plan sponsors are now on the regulatory hook for knowing precisely all the fees they're service providers are extracting from their 401(k) plans.
But the issue of 401(k) fees contains more complexity than even the more astute 401(k) plan sponsors might have anticipated. Furthermore, those service providers fearing their "hidden" fees might startle their clients have an incentive to mire up the muddled complex with miss-directions and sleights of hand.
This all leaves the most vulnerable 401(k) plan sponsors asking, "What's it all mean?" In an effort to help them begin to answer this question, we provided links to 10 articles that have appeared in the last two years that might just set them on the right road.
Recommended For You
10 Questions the DOL Wants the ERISA Fiduciary to Ask About 401(k) Fees – The DOL admits, due to the number of variables involved, there's no easy way to calculate the fees and expenses paid by your 401(k) plan. You might be surprised who the DOL suggests trying to find the answers to the following ten questions from. The new Fee Disclosure Rule now requires service providers to answer these questions.
New Study Refutes 4 Mutual Fund Fee Myths – Mutual fund shareholders can't have their cake and eat it, too. Indeed, a myth busting professor bluntly states "mandatory fee reductions are likely to injure fund shareholders." So much for the idea lower expense ratios mean anything other than what lower fees usually means: poorer service.
401(k) Fees That Matter – Too many accept the definition of "fees" without deliberation. Yet, even by looking solely at the fees associated with investment choice, the fiduciary can land in a state of confusion. This only increases liability. How can we fix this?
401(k) Fees That Shouldn't Matter – Should indirect fees matter? Academics may argue, but regulators have the final say. Unfortunately, different definitions of fees only confound the ERISA fiduciary. In the end, the new Fee Disclosure Rule makes it all fees must be tied to a specific service. Only then can the apple-to-apples comparisons begin.
Yale/Harvard Study Reveals Disturbing 401(k) Fee Paradox – If the DOL requires the 401(k) plan fiduciary to ignore a fund's investment performance, but the SEC still requires funds to disclose that performance, which will 401(k) investors choose? More importantly, who's left holding the liability bag? Ouch!
Study Reveals Five Factors That Help Lower 401(k) Fees – The Investment Company Institute comes out with a study that makes it look easy, but what's the catch?
New 408(b)(2) "Guide": Not Necessarily What 401(k) Plan Sponsors Hoped For – 401(k) plan sponsors may discover the Fee Disclosure Rule may be more hazardous than healthy. The DOL has not defined "disclosure," and that could be a problem for the unsuspecting 401(k) plan sponsor.
Second Look at Headline Grabbing 401(k) Fee Survey Reveals Major Questions – In the rush to get the headline, did the mass media just do a grave disservice to 401(k) plan sponsors and investors? This article reveals some of the confusion being promoted by the popular press.
Zen and the Art of Fee Disclosure: What 401(k) Plan Sponsors Can Expect from 408(b)(2) Service Provider Disclosures – If the above two article present the bad side of fee disclosure, this one shows some of the good, but warns it's all for naught if no one bothers to read the darn things!
401(k) Plan Sponsors and the Mutual Fund Expense Ratio Wild Goose Chase – Any talk of mutual fund expense ratios only diverts attention away from the true issue at hand – what are the true costs of those non-mutual fund products that make up nearly half of all 401(k) investments?
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
