What Are 401(k) Plan Fees and How Are They Charged?

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What Are 401(k) Plan Fees and How Are They Charged?

Many investment accounts and retirement accounts charge fees for a variety of services. There are people behind the scenes doing work to ensure that your account is running well and staying in line with the law. In that vein, 401(k) plan fees are charges paid to support a 401(k) plan. Support services can vary a lot among plans, but they coalesce around administrative services, investment services, and various individualized services.

How they are charged

Fees are charged in any of several ways. Some are charged directly to your account. Fees of this nature are done as flat fees or are allocated proportionately among individual accounts in your company. In other cases, fees are paid by your employer. In yet other cases, fees are deducted from the investment returns of the plan.

Where to learn about fees

Fees are described in your 401(k) plan literature, which is made available by employers and/or plan administrators. It pays to know what yours are and how they are charged, because they impact the dollar value of your plan. If you keep your 401(k) over the course of decades, the fees could conceivably reduce the value of your plan more than you had expected.

Employers have a duty under the Employee Retirement Income Security Act (ERISA) to follow rules for the benefit of their plan participants. They must select investments prudently, they must ensure that expenses are reasonable, and they must monitor the plans and keep them appropriate for their employees. They must disclose fees in a format that is easy to understand. The purpose of these rules is to bring to the surface the sometimes confusing and murky nature of fees that are charged.