|
By John Moynihan
As a Plan Sponsor, understanding your retirement plan fees and expenses are your responsibility and it is not always an easy task. A solid understanding of how fees are charged will help make your company’s retirement plan an asset, not a liability. There is no such thing as a free lunch. There are fees being charged to your plan; the key is to understand where to look for them. As an owner or executive of your company, you have a vested interest outside your fiduciary responsibility. Typically you have the largest account balance and, as a result, you are paying the largest amount of the fees. If you focus on the three categories listed below, you can effectively identify and confirm the fees that you and your plan participants are paying. 1.) Billable Expenses, these fees are generally billed to the company Administration / Record Keeping- Costs associated with keeping participant records, tax reporting and testing. Custodial / Trustee Services - Cost associated with the safekeeping of plan assets. Consulting - Expenses associated with independent advice regarding investment and / or plan structure. 2.) Asset Based Fees, paid from plan assets Management Fees-Fees associated with managing a mutual fund, including investment management, operation, administration, and marketing. Distribution and / or service (12b-1) fees-Fees included as part of a mutual fund’s expense ratio – used to pay for sales commissions, account servicing, and sometimes, to offset the cost of other plan services. Sales Charges- Fees assessed when a fund is purchased (front –end load) or at the time of sale (back end-load). Back-end loads are typically reduced or eliminated after a given period of time. These fees can be as high as 5-6%. Wrap Fee- Fee associated with managing a group annuity of an insurance company, including investment management, operations, administration, and marketing. It may include an insurance benefit feature such as mortality and expense. Note: You will want to convert these asset-based fees into a dollar amount to determine your cost. Example, Asset based fees total 1.25% or 125 basis points and your plan assets are $ 1,000,000, your cost for these charges would be $ 12,500 ($ 1,000,000 x 1.25%) 3.) Additional Participant Fee, charged to participants account Redemption Fees- Fees charged when a fund is sold before a stated minimum holding period has elapsed. Advice Related Fees-Annual and or / usage fees associated with online, one on one, or other advice platforms. Distribution Fee-A fee charged to withdraw participant assets from the plan. Loans-Service fees for participant loans. QDRO-Service fees associated with a Qualified Domestic Relations Order (Divorce). The Department of Labor clearly states that you need to understand, and evaluate fees and expenses within your retirement plan. If you do not have the expertise to do this analysis, then you must seek professional help. Article Source: http://EzineArticles.com/?expert=John_Moynihan
http://EzineArticles.com/?You-have-a-Fiduciary-Responsibility-to-Know&id=500553
|
