401(k) Plan Fee Disclosure

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on February 15, 2024

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The types and amounts of fees that are charged by a 401(k) plan can impact on the total return earned by plan participants, particularly over long periods of time.

For this reason, it is vitally important for plan participants to know how much they are paying in fees each year (or quarter or month) so that they can make informed investment decisions.

The Department of Labor requires all 401(k) plan sponsors to furnish their participants with a prospectus at least once every 14 months that provides a comprehensive breakdown of all fees that are charged by the plan, and when they are charged for non-recurring events, such as moving money from one fund to another.

This is fulfilled in the form of a 404(a)(5) participant fee disclosure. The plan administrator will create this document and then pass it on to the plan sponsor.

The sponsor then has the responsibility of sending this to each employee in the plan.

The disclosure can be sent via email or snail mail. Email is usually the preferred method, but all plan participants have to have either access to a computer or have opted in for email notification.

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401(k) Fee Disclosure Form

The fee disclosure form is sent to all new participants when they first join the plan and all current participants about once a year.

This form must break down three types of fees that are charged within the plan, which are listed as follows:

  • General plan information - breaks down the basic information about the plan and its general features, such as matching contributions, vesting schedules, loan provisions and other similar features.

  • Administrative fees - These are the fees that are charged for record-keeping, accounting, plan statements, the customer telephone service center, etc.

  • Participant fees - This includes fees such as an annual plan administration fee, fees that are charged for taking out a loan, moving money from one investment choice to another, and other miscellaneous plan services.

  • Investment fees - These fees can differ widely from one plan to another, depending upon the types of investment choices that they offer.

    Many plans offer traditional mutual funds as their primary investment options, and these funds may assess a sales charge at the time of purchase or redemption.

    There are also annual 12b-1 fees that are charged for the funds' operations and management. Some plans may instead charge a flat fee or percentage instead of transaction-based fees such as sales charges or commissions.

It is relatively easy to find the actual breakdown of all fees that are charged within the plan prospectus.

All fees are generally listed in boldface type so that they are easy to find and understand.

This allows employees to make more informed investment choices and minimize plan expenses so that their savings balances can grow at a faster rate over time.

In fact, the DoL has estimated $14 billion in savings to participants in 10 years as a result of fee disclosure rules.

The vast majority of the savings, according to the DoL, come from the increased access to plan information and increased ability to choose lower cost investments.

Fee disclosure rules may be relatively new - but they're in place because of a greater need for transparency.

Transparent fees show employees exactly what they're taking home, and ultimately help plan sponsors fulfill their fiduciary duty to act in the financial best interests of their plan participants.

That means, first and foremost, reasonable fees for 401(k) services.

Employers therefore need to be cognizant of the fees that their investments are charging and monitor whether they are reasonable or not on an ongoing basis.

401(k) Plan Fee Disclosure FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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