401(k) Hidden Fees Lead to 401(k) Lawsuits
Even with the Department of Labor (DOL) extension of fee disclosure regulations until April 1, 2011, plan sponsors need to be aware of the various types of hidden fees imbedded in their 401k plans. Doing so can help them avoid DOL audits, fines and lawsuits. Below is a compilation of the 401k hidden fees discussed in our 5 part series.
1. Asset management fees
2. Broker commission costs
3. Statement of Additional Information expenses
4. 12b-1 fees
5. Annual audit fees
6. Participant education fees
7. Investment transfer expenses
8. Non-discriminatory testing fees
9. Record keeping fees
10. Custodian fees
11. Third party Administration fees
12. Plan document filing/set up or conversion costs.
13. Trust service costs
14. Installation fees
15. Enrollment expenses
16. Loan fees
17. Termination fees
18. Surrender charges
19. Mortality Risks or M7E charges
20. Management fees
21. Wrap or bundling fees
22. Revenue sharing fees
Companies such as Radio Shack, Kraft, Bechtel Corporation, Wal-mart, and ING to name a few, have all had 401k lawsuits brought against them for breaches of fiduciary responsibility, using retail instead of institutional shares, 401k hidden fees and revenue sharing issues.
When April 1, 2011 comes around, even more plan participants and disgruntled employees will become aware of the mismanagement of their 401k savings.
Recessionary worries, market volatility and the current economy will make it a prime time for the IRS and DOL to enforce their 15% and 20% excise tax for plans that continue to resist reasonable fees for reasonable services and for plan sponsors who continue to duck their fiduciary responsibility.
About Charles Massimo
Recognized as industry expert and guest speaker at national industry conferences, Charles Massimo is a published author and media subject expert on topics ranging from wealth/asset management to investment and financial planning for high net worth families.