What 401(k) Fees Will I Pay in My Plan?

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What 401(k) Fees Will I Pay in My Plan?

There are several types of 401(k) fees:

Administrative fees

Many administrative services are needed for a 401(k) plan. There are typically accounting and bookkeeping services, legal services, and trustee services. Other services may be offered as well—transactions, telephone voice response systems, educational initiatives, software, customer service, and online services.

Administrative fees can be charged in any of several ways. Some are charged directly to your account via a flat fee or allocated proportionately among individual accounts. Or they may be paid by your employer. In other cases, fees are deducted from the investment returns of the plan.

Investment fees

Investment fees are the biggest part of 401(k) plan fees. They are assessed as a percentage of assets invested, and they are deducted from your investment returns. Investment fees cover the management of the investments in your 401(k) plan as well as any other investment-related services.

What kinds of services are covered under investment fees? There are sales charges (commissions), which cover buying and selling shares. There are management fees, which cover the managing of assets in the plan. There are also fees for bookkeeping, investment advice, toll-free phone numbers, and various administrative services. In addition to these costs, there may be special fees unique to certain investments.

Optional service fees

If you are taking advantage of optional features offered by your plan, such as a loan, you may pay a service fee. It will be charged to your account only, however.

401(k) expenses may be bundled together or handled separately. They may be offered by a single provider or several.