What Fees Are Your Paying and Are They Necessary?
The benefits of offering a retirement savings plan to your employees in unmatched. It helps attract and retain quality talent to work within your organization. Of course, there is a cost associated with offering such benefits to your employees.
While fees are standard when dealing with retirement plans, you should know what the fees pay for and how you may be able to save on these fees with your retirement plan. Standard fees to manage a retirement plan are typically a percentage of the investment. However, some funds and investments within your retirement savings plan may charge excess fees that are costing you and your employees more money than needed. Read on to learn more about some of the costs associated with retirement savings plans and what you can do to mitigate your fees.
What Are Some Fees and Expenses of a Retirement Savings Plan?
Fees associated with your retirement savings plan can be found in the fees and compensation section of your agreement. They are often inclusive of revenue sharing agreements of investment options and the non-explicit fees. This section will focus on the non-explicit fees of your retirement savings plan, which include soft dollars, sub-transfer agent fees, and 12b-1 fees.
- Soft Dollars: The soft dollars are defined by the Securities and Exchange Commission (SEC) Rule 28(e) as money paid to brokerages as “excess commissions.” In other words, your retirement planning specialist or brokerage may receive soft dollars as a benefit for doing business with specific mutual funds or other investments, enticing the brokers to continue using those investment options even if they re not benefiting you or your employees.
- Sub-Transfer Agent fees: Sub-transfer agent fees (a.k.a. sub-shareholder servicing fees or sub-TA fees) are fees paid to a mutual fund to track your services and investments.
- 12b-1 fees: These fees are paid to mutual funds or other investments to market and sell shares. They can cover the cost of providing shareholder services.
How Can You Control the Expenses of Your Retirement Savings Plan?
There are several ways you can review and understand your fees associated with your retirement savings plan. It is your job to ask the right questions to ensure you are not paying more than you should for offering employees retirement savings options.
First, you can request an annual written statement which outlines all compensation (direct and indirect) that your provider receives for managing your retirement savings plan. Honestly, this information should be provided by your retirement plan specialist annually without you having to ask for it. Makes sure everything is specified, including administrative fees, management, fund costs, insurance, annuity, and all other costs and fees.
Once you review your current costs, you have the right to ask your retirement plan provider to provide other options and their costs. Ask for cost comparison to equally review alternative plans and see if fees are less costly or services will decrease if you pay less in fees. During this process you should also find and understand all 12b-1 distribution fees and how much money is received from each investment option.
Finally, throughout the annual process of managing your company’s retirement planning options, ask for periodic reviews of fees and assets in the plans. Try to stay ahead of the process so you are not shocked by the bills of managing your retirement planning services.
Conclusion
Monitoring the fees of your retirement plan is an ongoing process. Make sure you stay on top of the fees associated with your plan to ensure you are not paying excessive fees. If you want to work with a retirement plan financial advisor who believes in full transparency, including fees and pricing options, contact Scott Tanker at 609-922-0201 to learn more.