The Misunderstanding of 401(k) Fees

Forbes had a nice blog post on how 401(k) plan fee disclosures are misunderstood.  According to a survey they cited, 22% of all plan participants still think that they pay nothing for the administration of their plan. That’s actually an improvement when it was 38% before fee disclosures.

While fees for 401(k) plans are in the 1 to 2% range, 25% of the participants who thought they paid fees thought that they paid 25% in fees!

What does this mean? I think a good part is that plan participants don’t read fee disclosures and if they do read fee disclosures, they may not understand that. That is why I believe that fee disclosures to plan sponsors and plan participants should have less jargon and be clear. Also, fee disclosures have been in place for only about a year, any major difference in participants’ knowledge will take time. All I know is that we still have work to do.

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