But after reading the fee disclosure on my wife’s own 401(k) plan, I must say that I’m now thinking that maybe nothing really happened at all. Check out what mine says under “Potential General Administrative Fees and Expenses”:
Administrative Fee – Per Account When applicable, other general administrative fees for plan services (e.g., legal, accounting, auditing, recordkeeping) may from time to time be deducted as a fixed dollar amount from your account. The actual amount deducted from your account, as well as a description of the services to which the fees relate will be reported on your quarterly benefit statements.
Translation: We might charge you some fees. We might not. Helpful, eh?
Administrative Fee – Pro Rata The plan incurs general administrative fees for ongoing plan administrative services (e.g., recordkeeping) of up to 0.21% annually of assets held in the plan investment options. These fees may be paid, in whole or in part, from revenue (e.g., 12b-1 fees, administrative fees) that Transamerica Retirement Solutions or its affiliates receive from the plan’s investment options. If this revenue is not adequate to cover the fees, the plan administrator will decide if the shortfall will be deducted on a pro rata basis across some or all investment options held in your account or as a fixed dollar amount from your account, unless paid from other sources.
General administrative fees other than the charge above, for administrative services (e.g., legal, accounting and auditing) may from time to time be deducted on a pro rata basis across some or all investment options held in your account.
The actual amounts deducted from your account, as well as a description of the services to which the fees relate will be reported on your quarterly benefit statements.
Translation: We have to spend some money to manage these 401k plans. (Duh.) Certain mutual funds kick us some money back in the form of 12b-1 fees. (So thanks, those that buy these more-expensive funds! Vanguard doesn’t ever pay 12b-1 fees. Boo Vanguard!) If those aren’t enough, then we might charge you some fees. Unless we don’t. But we might. We’ll let you know after we charge them.
Plan Service Credit – Plan service credit represents an expense refund for one or more of the investment funds offered by your plan. When applicable, a Plan Service Credit is added to your account and lowers the effective annual expense ratios of the investment fund(s) for which a plan service credit applies. Any plan service credit will be reported on your quarterly benefit statements.
Translation: We might refund you some money from time to time. *Grin* Highly unlikely, but heck, who knows? We’ll get back to ya.
What’s the point of requiring these disclosures when all they do is drop tons of gobbledygook on you? They should be required to list hard numbers, at the very least what they charged for the trailing 12 months. The mutual fund expense ratios were disclosed clearly, but they were easily available in the past as well.
The bottom line is that – just as before – you need to check your statement carefully. Don’t just stuff it into a drawer. Realize that even “small fees” like between 1% to 2% annually are huge destroyers of your wealth. If you don’t know why, watch the PBS Frontline TV episode The Retirement Gamble which brought attention to how significantly a bad 401(k) can reduce your eventual nest egg amount as compared to a good 401(k). Not all 401ks are created equal, and the one I make fun of above is actually not bad, but some are truly horrendous.