.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} If someone asked you the fee percentage your company’s 401(k) plan deducts from participants’ accounts, would you have an answer?

No clue? Don’t feel bad. According to a nationwide survey by AARP, more than 80 percent of 401(k) plan participants said they don’t know whether their funds are subject to fees or what the amounts of those fees are.

American workers have invested an estimated $3.3 trillion through employer-sponsored defined contribution plans such as 401(k) accounts, which proponents of reform say makes meaningful comparisons by companies more important than ever. Just a 1 percentage point increase in fees can result in tens of thousands fewer dollars being available in an account upon retirement.

The U.S. Department of Labor, which regulates these plans, has released draft rules that would require more complete disclosure of fees charged by 401(k) plans. Congress is also eyeing reform. Earlier this month, Iowa Sen. Tom Harkin introduced legislation he co-sponsored that would require 401(k) plan providers to disclose all fees that are taken out of participants’ retirement accounts.

If a 35-year-old invested $20,000 in a plan over 30 years that had fees of 0.5 percent, he would have more than $132,000 at retirement, assuming he averaged a 6.5 percent return. Bump up those fees to 1.5 percent, and the same account would generate less than $100,000 for retirement.

Currently, employees may have to sift through a variety of documents to determine the fees that are imposed upon their accounts. In many cases, they don’t even know whether there are fees or how to request the documents that would disclose them.

How much do you (think) you pay per year for your 401(k) plan?

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Source: July 2007 AARP Survey

“It is absurd that millions of Americans rely on 401(k) plans for their retirement security and yet they aren’t told what fees they are paying to maintain these accounts,” Harkin said in a release.

His bill, which is co-sponsored by Wisconsin Democratic Sen. Herb Kohl, would increase fee information that both employers and participants receive, as well as require disclosure of relationships between all parties with financial interests in the plan. A 2006 report by the Government Accountability Office found that plan sponsors “may not have information on arrangements among service providers that could steer plan sponsors toward offering investment options that benefit service providers but may not be in the best interest of participants.”

Plan administrators such as Principal Financial Group Inc. say that any new disclosure requirements must provide relevant and meaningful information, or may otherwise just drive up costs and add another layer of complexity that discourages employees from investing.

“We have provided input and will continue to do so with a goal to ensure that any changes add value and meaning to the highly successful employer-sponsored 401(k) system,” said Terri Hale, a Principal spokeswoman. “Specifically, changes in disclosure should be understandable and relevant to the decisions made by plan sponsors and plan participants and should not have the unintended effect of discouraging employees from saving.”

According to the 2007 Retirement Confidence Survey conducted by the Employee Benefits Research Institute, 77 percent of workers have access to an employer-sponsored retirement savings plan, and 80 percent of those workers participate in a plan. However, another survey indicates that nearly half of Americans have accumulated less than $25,000 in savings and investments, including their employer-sponsored savings plans.

Though important, cost is just one of several factors employers should consider when choosing a plan, said Keith Gredys, chief executive and chief operating officer of Kidder Benefits Consultants Inc. in West Des Moines.

“The goal is not necessarily to provide the lowest-cost solution, but the best solution for each company,” said Gredys, whose company manages more than 1,000 qualified plans across the country with nearly $1 billion in assets.

“A good plan needs to be not only efficient, but also effective to meet the client’s needs,” he said. “If employees don’t participate and contribute what they should, then it’s all meaningless. So there has to be education, and there’s a cost to education; it’s not free.”

One challenge for the industry will be to break out service and cost information that in many cases is bundled together under one price, Gredys said. “That’s what’s been confusing in the past; you didn’t know the breakout of those items because a competitor might be building it in and saying, ‘We’re doing that for free.'”

Kidder breaks down each plan into four components and provides corresponding costs for each, including design and legal documentation, administration and compliance, the actual investment cost, and the actual participant education cost, Gredys said. By doing so, “it allows (plan sponsors) to focus on what’s important for them and their plan,” he said.

Investment fees, such as those charged by mutual fund advisers to select securities for the funds, account for between 80 and 99 percent of most plans’ fees, according to the 2006 GAO report. Plan record-keeping fees were the second-highest portion of total fees.

“The issue that’s out there now is, how much should the participant know?” Gredys said. Rather than overwhelming participants with too much information, “the focus should be on educating the plan sponsor,” he said.

“They are the fiduciaries of the plan who must understand how the plan operates. And if they don’t understand it, they should delegate it to experts who do understand it.”