Posted on 26 January 2012
By Mark Miller
If you own a small business, the time to comparison-shop for 401k plans has never been better.
Low-cost plans are cropping up, as new federal regulations kicking in this year call for greater disclosure of fee information to plan participants and sponsors.
The numbers should be a real eye-opener. Fees vary widely among retirement plans — anywhere from well below 1 percentage point to a whopping 5 percent. Yet 71 percent of retirement savers don’t think they pay any investment fees at all, according to a recent AARP survey.
That’s a significant issue, since fees are one of the most important factors determining success or failure in meeting retirement goals. Small workplace retirement plans have some of the highest all-in costs in the industry.
But as Sam Cooke crooned so memorably: a change is gonna come.
The 401k Fair Disclosure for Retirement Security Act takes
effect in April.
To compete in the new environment, some of the industry’s leading retirement plan providers are launching new low-cost offerings aimed at small plans. The most important entry to date is from Vanguard Group, a leader in low-cost passive index fund investing and a big player in workplace plans. Vanguard launched a new initiative last fall targeting retirement plans with assets up to $20 million; although the new offering includes some actively managed fund options, the platform really is built
around Vanguard’s very low-cost index funds.