Fees are the income basis for plan administrators and brokers, so there's no getting around them when building a retirement plan for your employees. However plan fees can also be the source of many questions and disputes. Fees, even seemingly small ones, can eat away at long-term savings over time; and if employees are unaware of those costs and the effects on their accounts, they might hold you liable for shortfalls in their savings. It's critical for you to know, understand and communicate your plan's fee structure and its impact on employee retirement funding.
The Employee Benefits Security Administration highlights the potential of the problem: Under a typical, modest investment scenario, a 1% difference in fees and expenses over the course of an employee's career would reduce their retirement account balance at withdrawal time by 28%! To make matters worse, smaller plans often pay higher fees than larger ones, and these fees are passed on to the participants.
It's critical to investigate plans and their fee structures thoroughly before making your choice. The Department of Labor's "Understanding Retirement Plan Fees and Expenses" provides an excellent resource for employee benefits managers and advisors. It contains a worksheet for cost-benefit analyses on 401(k) plans and is available at the Labor Web site, www.dol.gov/ebsa/.
Please feel free to call us for help in choosing a plan that offers your employees solid retirement savings with the best fund expense profile.