Several ways to find out what 401(k) really costs


Figuring out what you're paying for your 401(k) isn't easy. Here are some pointers.

Mutual funds, where most 401(k) money is invested, collect a percentage of your account balance for management fees and operating costs. This charge, called the expense ratio, is disclosed in fund prospectuses and on many fund-company Web sites.

In contrast, fees related to the administration of your 401(k) plan - for record-keeping, employee education and other services - are harder to find.

Start by retrieving your most recent quarterly account statement or by logging on to your plan's Web site. If you have a printed statement, look for line-item charges under such headings as "record-keeping" or "administration." Online, the fees may be listed under "investment transactions," "daily activity" or "account history."

They may not appear in dollars and cents. They're often collected by reducing the number of shares you own in your mutual funds.

If you don't see any deductions, contact your employer's benefits department or the outside firm that administers the plan. Ask if there are overhead costs and where you can find them.

If your 401(k) plan is run by a mutual fund provider, there won't be distinct administrative fees. Fund companies often absorb such costs in return for the chance to stock the plan with their own funds, from which they earn management fees.

If that's the case, review the fund choices closely. Plans sponsored by large employers often qualify for lower-priced institutional funds, or institutional share classes of mutual funds. If such options are not offered, ask your employer whether they might be added.

Also, check whether the funds charge 12b-1 fees to cover sales and promotional costs. Switching to funds without 12b-1 fees can boost your returns significantly.

More information about your plan can sometimes be gleaned from federal Form 5500, in which employers must disclose certain fees and commissions paid to 401(k) brokers and plan providers.

You can request the form from your employer or view it at no charge at, a Web site run by a benefits consulting firm.

Ask your employer what services are being provided in return for the fees and commissions, and whether costs can be cut.

Walter Hamilton writes for the Los Angeles Times.

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