How much are you paying in 401(k) fees? You may find out
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From Times staff writer Walter Hamilton:
Fees that workers pay for 401(k) retirement plans have a nasty way of adding up. The government now wants to make it easier for you to see what you’re shelling out.
Under a rule proposed by the Labor Department on Tuesday, an employer that sponsors a 401(k) plan would have to provide a side-by-side comparison of the expenses and historical returns of the plan’s investment options.
Currently, employees often have to piece together that information from multiple documents.
‘It’ll help eliminate confusion in the sense that people will have the information they need, the basic information in a usable format to make decisions about how to invest for their retirement,’ said Bradford P. Campbell, assistant secretary for the Labor Department’s Employee Benefits Security Administration.
Companies also would have to tell participants every quarter how much they’re paying in 401(k) administrative costs -- information that many employers don’t currently provide.
The Labor Department proposal follows criticism by lawmakers and others who say it can be impossible to figure out how much you’re paying in fees that eat up investment returns.
Dennis Lynch, senior investment consultant at Ipswich Bay Financial Resources, a 401(k) consulting firm in Danvers, Mass., called the Labor Department’s proposal ‘long overdue and much needed.’
‘Without this regulation, it is difficult-to-impossible for a 401(k) plan participant to determine the actual cost being charged against their account,’ he said.
The Labor Department estimates that the plan would save workers $6.1 billion through 2018 -- although two-thirds of that amount represents a reduction in the estimated time people would spend analyzing their 401(k) investments.
The Labor Department also plans to require disclosure of previously hidden financial ties -- for example, payments by a mutual fund company to consultants who advise employers on which funds to offer in their plans.