Both your business and employees stand to benefit from the U.S. Department of Labor’s new rules regarding 401(k) plan services. Beginning July 1, 2012, 401(k) providers are required to use a more transparent and standardized approach for disclosing their fees.
Since they debuted 30 years ago, 401(k) plans have become the most popular retirement savings option in the private sector. Many providers have designed the plans they offer so that employers pay a small ancillary fee while their employees shoulder a larger percentage of the plan’s total cost. For smaller businesses, these fees are frequently hidden within the assets offered in the plan, making it hard to ferret out what is actually being paid. Continued payment of these high fees could cost employees tens of thousands of dollars or more in retirement savings over the course of their careers.
Although clients typically deal with a single outside provider, there is an entire system of firms that service 401(k) plans, including administrators, custodians, investment managers, brokers, consultants, lawyers and accountants. The new rules are aimed at helping employers drive harder bargains with service providers and helping employees make more informed choices within their plans. The hope is that the new disclosures will prompt sponsors to benchmark their plans more often to make sure they’re getting the best value for the fees they are paying.
Examine Your Plan
If you’ve let your business’ 401(k) plan run on cruise control in recent years, you’d be well advised to take an in-depth look at the fees being levied by your current provider.
If you discover that your plan has all-in participant fees that are over one-and-a-half percent, it may be time to start shopping for a new provider who can deliver for less. The plan sponsor has a fiduciary responsibility to run the plan in the best interest of your employees. Through transparency and understanding you may be able to find lower fees and improved service, from which both your business and employees will benefit.
John Stanton joined Insperity in March, 2003 as Director of Support Service. In 2004, he became the Director of New Business Implementation for the Retirement Services Group (ARS), where he managed the installation and conversion of new 401(k) customers. In 2005 he was promoted to Managing Director of Retirement Services. John received his degree from Purdue University, with a major in Mathematics.