Now, more and more evidence is gathering that employees are not only funding a high percentage of the retirement contributions, but they are paying the bulk of exorbitant fees for both management of the plan and the investments included in the plan.  Recently, the Center for Retirement Research at Boston College estimated that the cost of excess fees to 401k savers is in excess of $29 billion per year.  The total cost to each participant is difficult to highlight, because there are layers of fees designated as administrative, investment management, and a number of others.  In one specific example, the total fees for a well known mutual fund were two and a half times more expensive than the same fund in another share class.  This most recent cost shifting exercise can cost a participant thousands, more likely hundreds of thousands of dollars over a career.

The U.S. Department of Labor is actively engaged in advising both employers and participants about the potentially excessive costs embedded in their plans. Even the employers are often unaware of the true cost of sponsoring a 401Kplan.  We are seeing a number of lawsuits brought against sponsoring employers and the investment companies that provide 401k options, and a number of these have been settled in favor of the complaining participants.

If you sponsor or participate in a 40lK plan, you should encourage a review of your plan, and a comparison with alternatives.  For additional information, contact us...