The Department of Labor has published new 401(k) plan rules and regulations requiring full transparency of fees. Though plan sponsors and participants have not previously been sent itemized bills, the Department of Labor lists 17 fees they have been incurring. These fees include marketing, legal services, record keeping, investments and more. Under the new rules, indirect fees must also be disclosed. For example, when a company sends an employee to a conferences run by a 401(k) vendor, the vendor passes this cost off to their clients through fees.
With the new transparency, “People will find there were a lot of pigs at the trough,” said Jeff Acheson, a partner at Schneider Downs Wealth Management in Columbus, Ohio.
How do these fees affect your retirement? With so many pigs at the trough, your 401(k) plan can be sucked dry. Estimations show hidden fees of just one percent can reduce retirement by roughly 15 percent over 30 years.
The General Accounting Office says the average 401(k) balance of those retiring last year was just $144-thousand. Meaning, the average monthly income a retiree receives from their plan is at the upper end of $400-$500.
The new rules and regulations also hold business owners and plan sponsors criminally liable for their 401(k) plan compliance. Unfortunately for business owners and plan sponsors, the Department of Labor says 77 percent of plans are out of compliance.
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