Hidden 401(k) Fees You're Probably Paying

Many employers significantly underestimate the amount they are paying for 401(k) fees. The Government Accountability Office recently asked 1,000 401(k) plan sponsors how much they pay in fees, and then compared the data they provided to publicly available filings, investment fund prospectuses, and fee reports generated by BrightScope, a firm that tracks and rates 401(k) plans, to see how much they actually paid in fees. Many companies didn't know or significantly underestimated the amount that is deducted from employee retirement accounts to pay fees.

"In several instances, sponsors of large and small plans did not know or fully understand the fees charged to their plans, because fee arrangements have become so complex and may be disclosed differently, adding to sponsor confusion about plan fees," according to the report. "In addition, because sponsors of plans of all sizes may not be aware of certain fees that participants are paying, such as transaction costs and wrap fees, it is difficult to get a clear understanding of the total fees that participants are actually paying." Here are some of the 401(k) fees you may not know you're paying:

Recordkeeping fees. Almost all plan sponsors (85 percent) report paying recordkeeping and administrative fees, ranging from 0.01 percent to 37 percent of plan assets annually. "Because recordkeeping fees under a revenue sharing arrangement can be based on the amount of plan assets under management, the amount paid to the provider for recordkeeping services could increase as the fund grows and may get quite large if the sponsor is unaware of these asset-based fees," GAO found. "This could result in the plan--the sponsor and participants--continuing to pay more for recordkeeping services as assets grow, although the level of recordkeeping services provided tends to remain the same."

Investment management fees. Investment management fees account for the majority of 401(k) plan charges, but about half of 401(k) plan sponsors did not know if they or their participants paid investment management fees or believed these fees were waived. Sponsors may not know if their plans paid investment management fees because these costs are usually deducted from participant assets and not invoiced to the plan sponsor. Among respondents who knew they were paying these fees, plan sponsors reported that participants paid between less than 0.01 percent and 3.24 percent of assets. In most 401(k) plans (73 percent) participants paid 100 percent of the investment fees.

Transaction costs. Many plan sponsors may not be aware that their participants are paying transaction or trading costs out of fund assets, including commissions when an investment manager buys and sells securities within a particular investment vehicle. Almost half (48 percent) of sponsors did not know if their plans incurred transaction costs, and only 12 percent said that their plans pay these expenses. One sponsor of a large plan with 15,000 participants and over $100 million in plan assets told GAO that its plan does not pay transaction or trading costs. However, BrightScope found that the plan was charged about $310,400 in transaction costs. Average transaction costs for the investment options offered in the 401(k) plans surveyed were approximately 0.45 percent of assets, and were found to be as high as 2.72 percent.

Consulting or advisory services. Some 401(k) plans hire consultants or advisers to select and monitor investments or negotiate fees and services. When this happens, 401(k) participants are usually the ones who pay for it. GAO's survey found that 85 percent of plans hired a retirement plan consultant or investment adviser in 2010, and in 77 percent of these plans participants paid between 0.01 percent and 1.4 percent annually for these services. Only 17 percent of sponsors paid for 401(k) consultants or investment advisers from another source.

Revenue sharing. Most plan sponsors don't understand exactly how revenue sharing works within their 401(k) plan. An estimated 48 percent of plans did not know if their service providers had revenue sharing arrangements with other providers, GAO found. GAO uncovered several examples of plan sponsors unknowingly paying high fees under revenue sharing arrangements. For example, one plan sponsor with about $6 million in assets reported not knowing if its plan paid revenue sharing fees, but a review of its investment documents indicated that the plan paid about $5,000. And some plan sponsors that are aware of revenue sharing arrangements appear not to understand the full cost and are paying higher fees than they reported. One 401(k) plan with over 500 participants and approximately $13.5 million in assets paid 16 times more in recordkeeping and administrative fees in 2010 than the sponsor reported during the GAO survey. Another small plan sponsor with 65 participants and about $5.8 million in assets told GAO the company did not pay anything for recordkeeping and administrative fees, but the fee report the sponsor provided indicated the plan actually paid about $10,700, including about $5,900 invoiced to the company and approximately $4,800 in revenue sharing fees deducted from participant accounts.

High fees for small plans. Plans with fewer participants and lower plan assets generally pay higher fees than large plans with more money invested. Small plans with fewer than 50 participants paid an average of 1.33 percent of assets in recordkeeping fees, compared to the 0.15 percent paid by sponsors of larger plans with more than 500 participants. For example, the plan that paid the highest fees, 37 percent of plan assets, started the plan in 2009 and had less than $1,350 in the plan in 2010. However, larger plans are more likely to deduct recordkeeping and administrative fees from participant accounts than smaller plans. Some 32 percent of larger plans reported charging these fees to participants, and another 22 percent paid only part of the cost. "Many of these fees charged in 401(k) plans are passed along to plan participants, which ultimately results in reduced retirement savings," GAO found.

Twitter: @aiming2retire



More From US News & World Report

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • US, Russia move closer to new Syria ceasefire after talks
    US, Russia move closer to new Syria ceasefire after talks AFP News - 1 hour 50 minutes ago

    Washington and Moscow made key steps towards agreeing a new ceasefire in Syria, but a final deal has not been reached, US Secretary of State John Kerry and his Russian counterpart said after talks Friday. Kerry and Russian Foreign Minister Sergei … More »

  • Business Highlights Associated Press - 1 hour 56 minutes ago

    ___ Yellen suggests rate hike is coming but offers no timetable Federal Reserve Chair Janet Yellen said Friday that the case for raising interest rates has strengthened in light of a solid job market and ... … More »

  • California governor signs bill banning coal-export funding Associated Press - 2 hours 16 minutes ago

    California Gov. Jerry Brown signed legislation Friday banning state transportation funding for new coal export terminals. The bill represents a victory for environmentalists as they campaign aggressively ... … More »

  • Stada shareholder AOC pushes through board reshuffle
    Stada shareholder AOC pushes through board reshuffle Reuters - 2 hours 18 minutes ago

    Stada (STAGn.DE) shareholder Active Ownership Capital (AOC) succeeded in convincing stock owners of the German drugmaker to vote off its supervisory board chairman in a voting marathon, but the activist investor fell short of its goal of replacing … More »

  • Dollar rises following Yellen remarks on rate hikes AFP - 3 hours ago

    The dollar rose Friday against the euro, the yen and the British pound following remarks from the US central bank favoring a near-term increase in interest rates. In a much-anticipated address, US Federal ... … More »

  • Global markets drift after Yellen speech
    Global markets drift after Yellen speech AFP News - 3 hours ago

    European and US equities markets were split on Friday after US Fed chief Janet Yellen suggested interest rates could rise in the near-term. In words carefully parsed by market watchers, Yellen said recent months had seen conditions in the US … More »

  • How the Dow Jones industrial average fared on Friday Associated Press - 4 hours ago

    Stocks ended on a weak note Friday after Federal Reserve officials said the case has strengthened for raising interest rates above the super-low levels that have helped fuel a seven-year bull market. Phone ... … More »

  • Stocks end mostly lower after Yellen speech
    Stocks end mostly lower after Yellen speech Associated Press - 4 hours ago

    Stocks ended mostly lower on Friday after Federal Reserve officials said the case has strengthened for raising interest rates above the super-low levels that have helped fuel a seven-year bull market. ... … More »

  • UN ready to help Colombia peace deal
    UN ready to help Colombia peace deal AFP News - 4 hours ago

    The UN Security Council on Friday warmly welcomed the historic peace deal reached between Colombia's government and FARC rebels, and pledged to help ensure the agreement takes hold. The council met behind closed doors two days after the Bogota … More »

  • Kerry, Lavrov hold marathon Syria talks
    Kerry, Lavrov hold marathon Syria talks AFP News - 4 hours ago

    US Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov held marathon talks in Geneva on Friday for an expected push towards resuming peace talks for war-ravaged Syria. Asked during a break how the meeting was proceeding, Lavrov … More »

  • US stocks mixed after Yellen says picture firming for rate hike AFP - 4 hours ago

    US stocks were mixed on Friday after Federal Reserve Chair Janet Yellen said the case for a rate hike is strengthening, raising expectations of a move by year-end. Trade was fairly quiet as Yellen also ... … More »

  • Markets Right Now: Stocks end mostly lower on Wall Street Associated Press - 5 hours ago

    The latest on developments in global financial markets (all times local): 4:00 p.m. Stocks ended mostly lower on Wall Street, giving up a modest gain from earlier in the day after Fed Chair Janet Yellen ... … More »

  • Morales sees 'conspiracy' in Bolivia minister's murder
    Morales sees 'conspiracy' in Bolivia minister's murder AFP News - 5 hours ago

    Bolivian President Evo Morales said Friday that his government is the victim of a "political conspiracy" after protesting miners allegedly kidnapped and beat to death a minister who tried to negotiate with them. Defense Minister Reymi Ferreira … More »

  • New law makes insurance companies find, pay beneficiaries Associated Press - 5 hours ago

    Insurance companies will be required to locate beneficiaries of unclaimed life insurance policies in Illinois and pay them money they're owed under legislation that Gov. Bruce Rauner signed into law on ... … More »

  • Deals of the day-Mergers and acquisitions Reuters - 5 hours ago

    (Adds Alere, Fiat Chrysler; updates Rackspace) Aug 26 (Reuters) - The following bids, mergers, acquisitions and disposals were reported by 2000 GMT on Friday: ** Cloud services provider Rackspace Hosting ... … More »

  • Oil prices edge up but OPEC giants downplay output limits AFP - 5 hours ago

    Oil prices edged higher Friday but the market remained weak as OPEC's key producers cast doubt on the possibility of cutting output. Iranian Oil Minister Bijan Zanganeh on Friday said his country wanted ... … More »

  • Canada, hoping to boost profile, pledges peacekeepers to UN
    Canada, hoping to boost profile, pledges peacekeepers to UN AFP News - 5 hours ago

    Canadian Prime Minister Justin Trudeau's government on Friday committed 600 troops and Can$450 million (US$350 million) over three years to United Nations peacekeeping operations around the world. Touted by the Liberal administration as a … More »

  • Grain lower, livestock mixed Associated Press - 5 hours ago

    Grain futures were lower Friday on the Chicago Board of Trade. Wheat for Sept. declined 17.75 cents at $3.8350 a bushel; Sept. corn lost 7.25 cents to 3.1625 a bushel; Sept. oats was fell 3.75 cents at ... … More »

  • Canada PM Trudeau to mount charm offensive in China: officials
    Canada PM Trudeau to mount charm offensive in China: officials AFP News - 5 hours ago

    Canadian Prime Minister Justin Trudeau will tour the Great Wall, shoot hoops with retired basketball star Yao Ming and meet with women entrepreneurs when he travels to China next week to bolster trade and diplomatic ties, his office said Friday. … More »

  • Oil steady in volatile session, down 2 percent for the week
    Oil steady in volatile session, down 2 percent for the week Reuters - 5 hours ago

    Oil prices were largely unchanged on Friday in a volatile session, as traders reacted to comments from Fed Chair Janet Yellen and reports of missile activity in Saudi Arabia. The market was taking its cues from the movement in the dollar, which has … More »

  • Dutch PM Mark Rutte announces third-term candidacy
    Dutch PM Mark Rutte announces third-term candidacy AFP News - 6 hours ago

    Prime Minister Mark Rutte announced Friday his candidacy to head the Dutch government for a third succesive term in office, as the countdown moves towards next year's parliamentary polls. "Rutte also informed his top party leadership about his … More »

  • Yellen's case for rate hike boosts dollar; stocks surrender gains
    Yellen's case for rate hike boosts dollar; stocks surrender gains Reuters - 7 hours ago

    U.S. equities gave up early gains on Friday, hurt by a surging U.S. dollar after Federal Reserve Chair Janet Yellen said that the case for raising U.S. interest rates has strengthened in recent months. European stocks advanced, however, while oil … More »

  • 11 Turkish police killed in PKK suicide bombing
    11 Turkish police killed in PKK suicide bombing AFP News - 7 hours ago

    The outlawed Kurdistan Workers' Party (PKK) on Friday claimed a suicide truck bombing on a police building in Turkey's southeast that killed 11 officers and wounded dozens more. The blast came two days after the Turkish army launched an offensive … More »

  • British economy escapes Brexit blow, for now
    British economy escapes Brexit blow, for now Reuters - 8 hours ago

    Britain's high streets are heaving with shoppers despite June's shock vote to leave the European Union, big companies have reported few signs of distress and some tabloid newspapers are even talking about a post-Brexit economic boom. The … More »

  • RUBBER-Tokyo futures prices after evening session Aug 26 Reuters - 8 hours ago

    Following are prices for Tokyo rubber futures at the end of the Tokyo market's evening session on Aug 2016. Contract Day Volume Evening Volume * Aug 154.1 13 153.9 3 * Sep 155.6 41 156.5 66 * Oct 151.8 ... … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.129+0.001+0.78%
    N21.SI
    1.855-0.040-2.11%
    MC0.SI
    2.84+0.02+0.71%
    C52.SI
    4.22-0.05-1.17%
    Z74.SI
    0.58-0.01-1.69%
    5TP.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.29+0.08+38.10%
    5VI.SI
    0.36+0.07+22.03%
    BPF.SI
    0.192+0.030+18.52%
    AYD.SI
    0.27+0.04+17.39%
    BLU.SI
    0.40+0.05+14.29%
    BFK.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.205-0.055-21.15%
    BTJ.SI
    0.34-0.06-15.00%
    BCD.SI
    0.39-0.06-13.33%
    AYB.SI
    0.31-0.04-11.43%
    5VP.SI
    0.24-0.02-9.43%
    BAZ.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3582+0.0051+0.38%
    USDSGD=X
    1.5196-0.0071-0.47%
    EURSGD=X
    1.7809-0.0034-0.19%
    GBPSGD=X
    74.6820+0.437+0.59%
    SGDJPY=X
    5.7047-0.0235-0.41%
    SGDHKD=X
    2.9663+0.0023+0.08%
    SGDMYR=X
    9,748.1885-70.3965-0.72%
    SGDIDR=X
    4.9062-0.0141-0.29%
    SGDCNY=X
    1.0263-0.0043-0.42%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,324.00-0.60-0.05%
    GCZ16.CMX
    18.63+0.14+0.76%
    SIU16.CMX
    95.80-0.72-0.74%
    ^XAU
    2.080.00+0.10%
    HGU16.CMX
    47.29-0.04-0.08%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.24+0.08
    ^FVX
    1.63+0.06
    ^TNX
    2.30+0.03
    ^TYX