How do you know if your 401(k) plan fees are reasonable or excessive?
In our experience, many small businesses—all with a fiduciary duty to keep plan expenses reasonable–are unaware of the fees they are currently paying, an oversight which could translate into many thousands of dollars lost for your employees over the course of their retirement savings period.
The primary reason many small 401(k) plans pay above-average fees is an industry-wide lack of transparency which makes it difficult for employer plan sponsors to decipher what plans really cost, and leads to hidden fees, overly expensive fund line-ups, and a poor experience for employees.
You are busy– and reviewing your 401(k) plan provider’s 30+ page summary of fees and disclosures is not likely at the top of your ‘to do’ list. To help 401(k) fiduciaries understand their plan fees, The Prudent Planner offers a complimentary comparison where we will total all of the compensation a 401(k) pays to its service provider(s) and fund companies into a single, “all-in-fee” and then compare it to industry averages and the “all-in-fee” we would charge to manage your 401(k).
These comparisons can be completed with minimal time and effort on your part, and are based on the following information:
1. ERISA 408b-2 — plan sponsor 401(k) fee disclosure
2. Current fund line up with balances
3. Participant count
Bottom line, when your complimentary comparison is complete, it should be crystal clear whether fees are reasonable or if a change is in order. Regardless of the outcome, your employee interests are protected and fiduciaries have reduced their liability.