W Post: What They're Taking From Your 401(k) Obscure Retirement Plan Fees Add Up Shockingly

[Omaha Steve]

http://www.washingtonpost.com/wp-dyn/content/article/2007/04/21/AR2007042100135.html

What They're Taking From Your 401(k)
Obscure Retirement Plan Fees Add Up Shockingly

By Kathleen Day
Washington Post Staff Writer
Sunday, April 22, 2007; Page F01

Like 47 million other U.S. workers, software engineer Don Sengpiehl is counting on retirement money invested in a company-sponsored 401(k) savings plan.

But ask Sengpiehl how much that plan costs, and the 54-year-old Loudoun County resident -- who studied math at Massachusetts Institute of Technology -- won't be able to do much more than guess. Disclosures about 401(k) fees bewilder him, and he says he doesn't have the time or know-how to figure out what he's being charged, much less to monitor whether his employer is pushing for the lowest possible fees.

"I basically set it up, put it in motion and hope for the best," he said.

Many workers share Sengpiehl's ignorance about retirement plan fees, even as 401(k)s have become the dominant retirement savings vehicle offered by corporate America. Financial industry executives, consumer groups and federal regulators say that confusing and often fragmentary disclosures by employers and 401(k) managers make it hard for most workers to understand what they're being charged.

Unlike traditional pension plans, in which companies make all the investment decisions and promise a set amount upon retirement, 401(k)s require employees to take more responsibility for how the money is invested -- and therefore how much they will have at retirement. Increasingly, workers and regulators are asking how people can be expected to make wise choices without easier-to-understand, more complete information, especially about fees.

In recent months, class-action lawsuits have been filed against about a dozen big companies -- including Boeing, International Paper and Bethesda-based Lockheed Martin -- claiming that these employers have allowed financial managers of their 401(k) plans to charge excessive fees. In many cases, the lawsuits say, the companies simply have not fully understood which fees were being charged. Federal law requires employers that sponsor 401(k) plans to protect employees' interests, and the lawsuits claim that the companies have failed to seek the best price possible given the services provided.

FULL story at link.

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1. my armchair estimate is that administrators take 50%-75% of the tax benefit

401(k) was intended to be a tax break for those who sock away for retirement, but the plan administrators' fees take easily 50% or more of this benefit. in some cases, it could easily be MORE THAN 100%! that's right, in some plans, especially for small companies who haven't studied it through, you're better off socking money away in a regular, taxable account.

this is based on plans i've been a participant in (or refused until modified).