"Hidden" fees are costing 401(k) plan participants hundreds of dollars a year, according to a new report.
Around 76% of small business 401(k) plans paid "hidden" administration fees, 401(k) provider and recordkeeper Employee Fiduciary found in its analysis of more than 100 408(b)(2) fee disclosures collected from 31 different providers since December 2018.
Those fees cost plan participants an average of $228 per year, which Employee Fiduciary says can amount to them missing out on hundreds of thousands of dollars in their retirement savings over several decades when factoring in compound interest.
The company says that the 408(b)(2) fee disclosures that the Department of Labor began requiring in 2012 “often take the form of confusing, multi-page documents that are difficult for someone without years of 401(k) expertise to decipher.”
"Hidden 401(k) fees are incredibly profitable for these providers, so it’s in their best interest for their fee disclosures to be confusing,” Eric Droblyen, president and CEO of Employee Fiduciary, says in a statement.
The company adds that six out of the top 10 highest-priced 401(k) providers in terms of per capita administration fees also ranked in the top 10 in terms of the percentage of hidden fees. And insurance firms made up nine of the top 10 highest-priced 401(k) providers in terms of per-capita administration fees, Employee Fiduciary says.
Employee Fiduciary is a 401(k) provider for small businesses headquartered in Mobile, Ala. and offers retirement plan recordkeeping and administration services to 4,500 businesses around the country, the company says.
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