Q

How can I see what fees I’m paying for my 401(k)?

A

As required by law, you will be shown your annual 401(k) fee before signing up.

It costs money to run 401(k) plans, and it’s the plan participants who must foot the bill — these expenses are paid in the form of fees that are referred to a fund’s “expense ratio.” It’s now super easy to see your 401(k)’s expense ratio, but it wasn’t always so.

Thanks to a fine 2012 Department of Labor Initiative, 401(k) plan administrators are now required to provide a detailed annual chart of 401(k) fee information both before you sign up for a plan, and once annually once you’re on board. Unless you opted for a paperless system, the chart will be mailed to your home. The chart will list your expenses in two ways — both as percentage and a dollar per thousand figure. For example, if your expense ratio is 1.50 percent, or $15.00, it means that for every $1,000 the fund holds, it will annually spent $15.00 of that money in fees.

A great misconception is that fees are only assessed on gains. If only that were true. You will be assessed fees on your entire investment, whether it gains or loses value in any given year, which is why high fees can be such a drag on long term investment growth. Administrators are also required to provide an a list of any other fees and expenses charged due to any actions you may take on your account—these should be referenced on the form as “shareholder-type fees” and may include a charge assessed upon sale of the fund—the dreaded deferred sales charge (If you can, you should do your best to avoid funds that charge these.) In addition to this annual report, the plan administrator is also legally obligated to provide you a quarterly report that shows an actual dollar amount charged to your account for all expenses.

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