Understanding Your Plan's Expenses

Updated by Richard Phillips, EA, AIFA, CPC, CPFA, QPA, QKA

Retirement plans usually have three major expenses associated with them...

  1. Plan Administrative Expenses

    This may include plan services like recordkeeping, custodial services to safeguard the plan's assets, actuarial services, auditing services, compliance testing services, government filing preparation, etc. Essentially anything that is related to the ongoing maintenance of the plan and helps maintain the plan's qualified status.
    Sometimes these expenses are paid for by the employer, by the participants, or some combination of the two.
  2. Investment Expenses

    Investment expenses make up the largest expense for most plans. This includes investment management services - often provided by an investment adviser, as well as the expenses associated with the investment options offered in the plan.
    Most investment advisers are either paid via a direct charge to participants' accounts or through a commission structure with the investment companies.
    If your plan is using our investment advisory business, ERISA Advisers, as your investment adviser - your investment management expenses are a direct charge to your account. This is considered a superior model to commission-based expense structures because it provides unbiased investment advice and it provides full transparency of what you're truly paying.
    So if you're comparing your account on our platform against another 401(k) account, make sure you understand how the investment management expenses work so you can make a true comparison.
  3. Individual Service Fees

    These expenses are incurred when you make a request that incurs a fee against your account. An example would originating a loan or requesting a distribution from your account. These are services that only pertain to your account and are charged only to you.

Fee Methodology

When any of these expenses are charged to participants' accounts, there are several methods for determining how much each participant pays.

  1. Pro-Rata Allocation - Each participant pays their proportionate share of the fee based on the value of their account
  2. Per Capita - Each participant pays the same amount, regardless of account balance
  3. Per Occurrence - Each time a service is requested (distributions, loan originations, etc.)

Where can I find information about the fees charged to my account?

You can find information about the fees charged to your account on each account statement that you receive from us, as well as in your account's transaction history. These locations will tell you the dollar amounts that have been deducted from your account to pay for different types of expenses.

You can also find this information in your plan's annual fee disclosure. This disclosure helps you understand the methodology of how the fee is calculated and the frequency on which it is charged.

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