Fees and expenses have always been part of a retirement savings plan–some fees are associated with the administration of the plan and may be covered by your employer, while others are paid by you based on the specific investments and services you choose. Generally, there are three types of costs:
- General administrative services: Numerous services are necessary for the day-to-day operation of your employer’s retirement plan. The expenses associated with these services may or may not be covered by your employer and include items such as:
While some of these expenses are set at a fixed rate and others may vary from year to year, they are all allocated to each plan participant in a uniform manner.
- Specific investment services: Each investment offered in your plan has annual operating expenses and other fees. But, you pay only for the investments you actually use and in proportion to the amount of your investment. These fees are not deducted directly from your account; they are paid indirectly through the investment’s “expense ratio.” See the question below for more information.
- Personalized services: Personalized services provide you with access to a number of plan features and investments that you pay for, only if you use them. For example, if your plan allows for loans and you apply for one, you may pay a one-time loan initiation fee and/or annual loan maintenance charges. These fees are charged directly to your account — if and when you use the service.
|Type of fee||General Administrative Services||Specific Investment Services||Personalized Services|
|What it covers||
|Who pays||In some cases, your plan; in some cases, it is shared between the employer and participants.||Deducted from an investment's assets, resulting in a reduction in the investment's return.||Usually the participant if and when services are requested.|