The Labor Department is about to start requiring 401(k) plans to be much more upfront about the fees they charge, as Gretchen Morgenson pointed out in her New York Times column yesterday. If you're asking, "What fees?," you're not alone. A recent survey by the AARP found that 71 percent of all 401(k) account holders thought they paid no fees on their accounts.
But they do. And as you might expect for a vehicle in which the fees aren't widely publicized, they can vary greatly. A study last November found that expense ratios for 401(k)s ranged from 0.28 percent to 1.38 percent. The median expense ratio was 0.78 percent.
By far the biggest reason for those expenses is investment management fees. Those fees make up a whopping 84 percent of all 401(k) expenses. Increased transparency in 401(k) fees is more than likely to have a beneficial effect on those expenses for consumers.
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