New Rules Will Reveal Hidden 401(k) Fees
Remember when we talked about price shrouding, the pricing practice that means you’ll probably never be able to appropriately predict what you pay?
Well, here’s another example: the 401(k). Currently, there are largely undisclosed administrative and management fees, but according to The New York Times, new regulations will require their immediate disclosure.
Under the new rules, plan providers will have to disclose all fees to employers, which the Labor Department hopes will keep fees “reasonable” by allowing employers to comparison shop between plans with different costs. Employers will have to pass along some of that information, in terms of price per $1,000 invested, to plan participants.
It will be up to employers to educate their participants about the ins and outs of each option … but it’s not clear that they’re ready. A survey from the Government Accountability Office earlier this year surveyed 1,000 providers and found that half either didn’t know if they or their participants paid investment management fees or thought that the fees were waived by service providers. (Nope.)
According to an AARP survey, 71% of respondents didn’t think they paid fees on their 401(k)s. Thank goodness we’re finally getting some clarity.