Federal agency wants to help you track your 401(k) fees

You may not believe it, but there really are government forces trying to help you become better informed about your workplace retirement plan.

I wonder if their efforts are in vain.

The Department of Labor is moving ahead with a proposal for transparency, opening a 90-day comment period to collect opinions on a proposed guide to help employers find fee information in disclosures they get from the investment companies that manage their 401(K)-type retirement plans.

The department felt it needed to step in because companies were having a hard time locating the required fee information, which often was buried in legalese and multiple documents, said Phyllis Borzi, assistant labor secretary for employee benefits security.

Call the guide a road map, Borzi said during a media conference call. After watching what was being sent, Borzi said the department became “particularly concerned some employers, especially small employers, may not be reaping the full benefit of fee disclosure regulation.”

Like a GPS device calling out turn-by-turn directions, the guide would direct employers to a specific page or section to easily find fee information.

Why does this matter to you?

Because your employer has a fiduciary responsibility to act in your best interest regarding your workplace plan. To this end, your employer also has an obligation to watch the fees and expenses and to make sure they are reasonable. Folks, this guide directly affects you. The more your employer understands what you are being charged to invest your retirement funds, the more likely the company may negotiate a better deal so that your fees come down. And fees matter to what you ultimately end up with in your retirement account.

I hope you know — and you would know if you opened your 401(k) statements — that fee and expense disclosures were mandated two years ago. You are supposed to receive detailed information about the fees you pay.

Many people don’t realize they are paying fees. According to AARP, which polled 800 workers before the fee disclosure rule went into effect, 71 percent were unaware of the 401(k) fees.

The LIMRA LOMA Secure Retirement Institute looked at the issue before and after the new fee disclosure rule. Despite receiving notice about fees, the research company found nearly 4 in 10 retirement plan participants didn’t know they were paying fees or expenses. Before the fee disclosure rule, 50 percent of retirement plan participants didn’t know how much they paid in fees and expenses.

Fees and expenses that are passed on to plan participants can vary. Bundled in what you pay are expenses for legal, accounting and record-keeping services. You might be paying for access to customer service help or certain software. Funds that are actively managed might incur higher fees. If you work for a small company, your plan fees and expenses might be higher.

And those fees can have an effect on your bottom line. In an example provided by the Labor Department, let’s assume you have 35 years until retirement and a current 401(k) account balance of $25,000. You stop contributing, leaving the account at $25,000. Over 35 years, your account averages a 7 percent return and grows to about $227,000 at retirement. In this example, fees reduce the average returns by 0.5 percent.

But what if your fees were 1.5 percent?

You would end up with $163,000. That difference of 1 percentage point reduces your account balance at retirement by 28 percent.

You may not want to take the time to weigh in on Labor’s plan to require a guide to help employers. But at least make all the effort for transparency pay off. Open your retirement account statements. And when you do, spend more than five minutes checking them out.

If you’re not sure you’re getting a good deal, go to www.brightscope.com, which provides retirement plan ratings and research. You can enter the name of plan and get measures to help you see if the fees are reasonable and how they compare to other similar companies.

“When workers save for retirement, and play by the rules, they have a right to expect that their savings are not being diminished by excessive fees or conflicts of interest,” said Labor Secretary Thomas Perez.

Ultimately, the proposed rule can help employers agitate for lower fees by being better informed. The result could be more money in your retirement years.

Michelle Singletary: michelle.singletary@washpost.com.

Washington Post Writers Group

More in Herald Business Journal

Snohomish County’s campaign to land the 797 takes off

Executive Dave Somers announced the formation of a task force to urge Boeing to build the plane here.

A decade after the recession, pain and fear linger

No matter how good things are now, it’s impossible to forget how the collapse affected people.

Panel: Motorcycle industry in deep trouble and needs help

They have failed to increase sales by making new riders out of women, minorities and millennials.

Costco rises as results display big-box retailer’s resiliency

Their model has worked in the face of heightened competition from online, brick-and-mortar peers.

For modern women, 98-year-old rejection letters still sting

In a stark new video, female Boeing engineers break the silence about past inopportunity.

Tax reform needs the public’s input on spending priorities

The GOP tax plan is a good idea, but the next step should give us a voice on how taxes are spent.

Commentary: GM, Boeing fight a war of words over Mars

Boeing is strongly signaling how crucial deep-space exploration is to its future.

Under cloud of ethics probes, Airbus CEO Enders to step down

He leaves in 2019 after 14 years. Meanwhile, aircraft division CEO Fabrice Bregier leaves in February.

$4.99 sandwich promotion irks some Subway business owners

Management insists that “most franchisees support the promotion.”

Most Read