Home  >  Financial Articles and Q&A  >  Our 401k, has been fine until the recent notice when we...

Our 401k, has been fine until the recent notice when we were informed that there may be an additional fee charged if we choose to change funds more frequently.

It didn't indicate how frequent before the additional charge will be imposed. What I didn't like about the notice was this...the goalmaker option reallocates on a specific date no matter what is happening in the market. The "stable funds" have been negative returns for a number of years, and the fees are as high as some of the stock funds! Any help will be appreciated. There are a number of us wondering what is going on with our 401K. Before we go to our HR we want to know more, and since the administrator has not been very helpful(this was my fourth request for info) we want to make certain we can explain our issues.

Jul 31, 2013 by Deborah from Greensboro, NC in  |  Flag
1 Answer  |  3 Followers
Follow Question
5 votes

Deborah, 9.6 basis points means $.96 per thousand dollars. I can't tell from the information you provided if that fee is in addition to the investment related fees or is paid out of those fees. You are getting a good feel for how complex retirement plan fees can be. This complexity is an opportunity for some service providers to hide their fees. Fees can be difficult to understand but by no means impossible. Keep digging - you are on the right track.

A few hints - If the recordkeeping fee is in addition to investment fees and it is charged to you, it should show up on your statement. Keep in mind that it may be charged quarterly and so may seem less than 9.6 bps per year or the sponsor may be paying the fee for you. Also look for hardcopy statement fees and third party administration fees. All these are legitimate expenses but you need to understand what you are paying. As for the frequent change fees, these are legitimate too and serve to protect long term investors from fellow participants that try to use the retirement plan as a day trading tool, jumping in and out of investments and creating additional expense for everyone. One more point about investment fees - it is fine to use those fees to pay plan expenses but if excess fees are collected they should be returned to the plan or to the participants. Some service providers do and some don't but the plan sponsor/administrator has the responsibility to make sure the plan doesn't overpay for services. Good luck again.

1 Comment   |  Flag   |  Aug 01, 2013 from Kingsport, TN
Walter L. Sheffield III, JD, CFP®

I agree with this answer. When you go to HR, you might ask for a copy of the "404(a)(5) Participant Fee Disclosure Notice." This would be very helpful, although governmental plans are excluded from the ERISA requirement to provide them. Assuming that your plan is the State of NC 401(k) plan, it might or might not provide this, but it is worth asking.

3 likes | 
Flag |  Aug 01, 2013 near Raleigh, NC

1|600 characters needed characters left