WALNUT CREEK, Calif. — Millions of employees put money in 401(k) plans to build retirement nest eggs. But most don't know that the plans they invest in charge fees that can make their nest eggs smaller by thousands of dollars over the years.
Starting this summer, new federal rules will make it easier for employees to get a handle on these fees, which are subtracted from an account's value.
Information about fees already is offered by some plan providers, but not all. Some make the information available on Web sites, and others include it on quarterly statements, according to Catherine Collinson, president of the Los Angeles-based Transamerica Center for Retirement Studies.
The new rules will bring consistency to the disclosure process while making it easier for consumers to understand the fees they are paying, she said.
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"Ultimately, they will be taking greater ownership in their own retirement outcomes by understanding how different levels of fees can affect the size of their nest egg when they retire," Collinson said.
The fees pay for overhead administrative costs such as record-keeping and legal compliance requirements, along with expenses in cases where the fund is actively managed. (Some funds, such as index funds, do not have management fees.)
In May, the Transamerica Center released its 13th annual retirement survey, which found that 71 percent of employees with 401(k)s did not realize they involved fees.
The new rules, which also apply to 403(b) plans offered by non-profits and pension plans, were developed by the U.S. Department of Labor. They take effect Aug. 30. However, when investors actually get the information on fees will depend on their plan.