Retirement Plan Expenses – Who Cares, Right?

14 Aug

You Should!

As we’ve been analyzing small business retirement plans in the Santa Rosa area of late, what we’re finding isn’t pretty. Mainly, fees are much higher than they need to be.

Do you remember that friend of yours? The guy who, when it was his turn to buy the next round of drinks, suddenly was in the bathroom? That guy? He probably isn’t your friend anymore. The only damage he really did was cost you a few bucks and himself a good friend or two.

But when it comes to most retirement plans (like participant directed 401(k) plans) it is usually the participants who foot the bill and pay the plan expenses. Are the business owners ‘out in the restroom’ on this? Most business owners I know say “That’s how it should be!” We agree.

However, the plan’s sponsor (the business) does have a specific duty to make sure plan expenses are ‘reasonable’, especially when participants are paying those expenses.

This is a fiduciary duty.  The law says a plan sponsor must be vigilant about fees. So, if you work for a company that hasn’t had a recent review of plan expenses, it is quite likely there could be some cost savings if only a few minor changes were made.

Ask your current plan’s financial adviser for a clear cost breakdown as well as a cost-comparison analysis.  Ignoring this little detail could end up costing the plan’s trustees in the long run.


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