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Study: 401k Fee Disclosure Not Helping

A major undertaking by the Department of Labor seems to be missing the mark. Last year, it implemented new rules requiring 401k plan providers to disclose all fees associated with plan administration, investments and other expenses. This added transparency was meant to be beneficial for plan participants, as greater knowledge about fees could potentially help them make better retirement planning decisions. But a major industry organization discovered these efforts are mostly ineffective.

LIMRA, a global research organization specializing in financial services and insurance, revealed that before the new Department of Labor rules went into effect, half of defined contribution plan participants had no concept of how much they paid in annual fees and expenses. Post-disclosure, half of participants still have no idea.

“Despite the efforts to increase transparency, fee disclosure is still very cumbersome,” said Tom Zgainer, Vice President of Corporate Retirement Plans at Personal Capital. “Participants need an easier way to discover and understand the expenses associated with their retirement plans.”

A handful of participants did have some improved knowledge. “Our study found that 22 percent of participants believed they didn’t pay fees and expenses after receiving disclosure notices, compared with the 38% in our first survey, prior to disclosures going out,” said Alison Salka, corporate vice president and director of LIMRA Retirement Research.

Curious about your own 401k and what you may be spending in fees? Personal Capital built a free tool to help you discover just how many years you could be losing in retirement to plan expenses. Try the 401k Fee Analyzer by signing up for Personal Capital, linking your 401k account and running the tool. You can adjust for expected retirement age, annual contribution and employer match level, annual expected growth and any additional investment fees. If you discover your plan is in the “red” zone, it means you’re paying more than 2% per year in fees. If that’s the case, you may want to work with a financial advisor to reevaluate your investment selections.

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