A Guide to 401(k) Fees

By David Pitt, AP Personal Finance Writer

Retirement savings is a central topic in the Obama administration's proposed initiatives to help struggling middle class families. And one of the concerns to be addressed is improving the ability of workers to determine how much they're paying for the management of their 401(k) plan.

Making smart spending decisions often means comparing costs. The problem with retirement plans is it's often difficult to figure out exactly how much you're being charged because 401(k) fees are not spelled out very clearly.

The call for greater disclosure is centered on the fees workers pay for the operation of their retirement plans.

Even though several bills have been drafted in Congress to force 401(k) providers to lay out fees in plain language, the push for greater fee disclosure hasn't gained much traction.

This week's push to make it one of the administration's priorities was applauded by Rep. George Miller, D-Calif., the chairman of the House Education and Labor Committee, and author of a bill on fee disclosure.

"President Obama's call for transparency is welcome because workers deserve to know how much Wall Street is taking from their 401(k)s," Miller said.

One reason it's often hard to get a handle on 401(k) expenses is that not all of the charges are paid directly by plan participants, some expenses are paid by employers.

If you could lower fees in your 401(k) by 1% throughout your working years, you could as much as double your account balance by the time you retire, said Kristi Mitchem, a managing director at BlackRock Inc., a mutual fund provider.

One issue under consideration by regulators and lawmakers is requiring companies to provide an "all-in" fee that includes investment management and bookkeeping costs together.

For now, though, employees can just focus on those fees they can control, which are reflected in the expense ratios quoted in quarterly 401(k) statements.