Issue: Competition remains tight among 401(k) providers, federal scrutiny is rising, and the stock market is trending up.
Benefit: You'll enjoy improved negotiating clout when choosing a 401(k) vendor.
Action: Renegotiate 401(k) expenses at least once a year. Use the following four questions to narrow your shopping list.
Is your organization overpaying for its 401(k)? If you don't know, first find out what you should be paying, then start shopping around for a better deal.
Reason: You'll benefit from better negotiating clout these days because competition among plan providers is tight, and federal regulators are tightening the screws on them.
First, it's important to understand 401(k) fees: Investment management fees account for most 401(k) expenses. What's typical? Plans with fewer than 500 people that carry an average balance of $14,000 pay an expense ratio of 1.50 percent to 2.0 percent of plan assets in investment fees, according to publishers of the 401(k) Provider Directory. Some employers pay the fee while others deduct it from plan assets.
Administrative fees cover services such as statements and education materials. But read carefully; some contain hidden fees.
Shopping around: 4 key questions
When negotiating or shopping for a new 401(k) provider, ask these four questions:
1. Which fees are deducted from 401(k) assets and which do you pay separately?
2. Which services do basic fees cover and which incur extra charges, such as loans, employer matching contributions and automatic enrollment?
3. Will we incur a charge for ending our agreement early?
4. What are the fees for each investment option? Example: Small capitalization funds have higher expenses than large-cap funds.
For more advice on 401(k) fees, go to www.401khelpcenter.com or www.dol.gov/ ebsa/publications/401k_employee.html.
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