Uncovering and Understanding Hidden Fees in Qualified Retirement Plans

Abstract

In the United States, the level of concern over 401(k) fees is steadily increasing. However, very few employers understand the nature and scope of the retirement plan industry's business model. Not even the Federal Government fully grasps the issue. Understanding how hidden fees came about, and recognizing the specific types and amounts of such fees, will help employers make better decisions regarding 401(k) services. That understanding will help create a more secure retirement for American workers. Notwithstanding the obscure nature of retirement plan economics there is a rigorous way to determine the costs of any such plan. Directors, officers, and executives of plan sponsors have a fiduciary duty to know, manage, and control all of the fees assessed to plan assets. Modern fee structures are the result of mingling fiduciary and non-fiduciary philosophies. Hidden and excessive fees can be corrected by embracing an independent fiduciary only approach toward plan management. There is more at stake than is generally contemplated. Correcting errant business practices in the 401(k) industry is important for participants, plan sponsors, and society as a whole.