Pensions for retired employees are still available in some sectors, but for most workers, private investments, Social Security and 401(k) plans will make up the bulk of their income after retirement. As employment options have become more flexible and fewer workers spend entire careers with one company, plans that travel with investors and operate independently of employers makes sense.

However, not all 401(k) plans are created equal. Some packages include fees that you may not see immediately when you look at your fee disclosure statement. While all plans are required by law to provide such statements, operating fees and annual charges occupy a far less prominent position on the page than other information in some statements. Your CPA can help you find these fees and seek solutions that can add up significantly by retirement age.

Note Names and Places

Your disclosure statement must list all fees assessed, but they aren’t always clearly labeled. You might see a column labeled “total annual operation expenses,” “asset-based fees” or “expense ratio.” Returns are typically reported as a net figure on monthly and quarterly statements, but the annual statement will include total returns; your fees are typically listed as a percentage of these totals. Percentages vary, but an economical plan generally has operating expenses of under 1 percent; a costly 401(k) program may assess fees of closer to 2 percent per year.

Another way some plan administrators minimize the visibility of fees is with rearranging tables and columns. Fees are harder to see when they’re listed on a different page or buried as one column among many in a bewildering field of figures. A CPA who has seen hundreds of disclosure forms in all their permutations can help you find and calculate how much money your plan’s fees are costing you.

What Do Your 401(k) Expenses Buy

The smallest fees are not always the best option, particularly if your fund is hands-on and requires extensive managerial involvement. However, other high fees go to pay for enrollment efforts or marketing rather than enhanced customer service, greater responsiveness or high performance. Your financial advisor will work with you to determine if your current plan is giving you the service for which you’re paying that additional amount.

Fees also rise when plans have active management. Transactions cost money, and every time assets are bought and sold, the mutual fund’s administrators pay a fee – an expense that gets passed along to plan participants.

A plan that offers a significantly higher return on investments than many could be worth an additional fee for the plan’s administrative costs, but in others, high operating expenses could indicate that promotion is more important to the plan’s managers than performance. Some funds use the money you pay into them to give service providers rebates; others put the additional funds toward advertising and expansion. While a fund needs a certain number of contributors to enhance its return rate, focusing too heavily on enrollment growth and too little on financial growth can lead to disappointing performance.

A difference of half a percentage point may not sound like much, but over years of contributions to your 401(k) plan, it could amount to years of retirement lost in expenses. You are entitled to see disclosure statements on your investment plan, so if you haven’t seen an annual statement lately, ask for one and go over it with your CPA to find buried expenses.

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