If you feel your 401(k) plan fees are too high and you are ready to say something to your employer, know you can make a difference if you take the right approach.
Let’s start with what not to do: Complain, make misinformed statements or idle threats.
Those three points should sound logical, but I have seen the emails from employees that strike one of those tones.
There is a better way to have a conversation with your employer to facilitate change. Before you pick up the phone or send that email, here are a few thoughts.
401(k) Plans Are Not Free
Workplace retirement plans are complex programs that take expertise and experience to run.
When they are not, employers face fines, audits or even lawsuits which are very time consuming and expensive.
For more perspective on what goes on behind the scenes with 401(k) plans, check out 4 Things That Are Behind Your 401(k) Fees.
Now onto what not to do.
Don’t Complain
When you send a quickly worded email to your HR department that goes something like “Our 401(k) Fees Are Too High,” it will not get the reaction you are hoping for. Trust me.
I see them and help my clients respond to them. Know that most employers are very aware of plan fees from their service partners, the media and telemarketers who constantly call them. Your email or phone call to complain will be one more voice in the proverbial choir.
That isn’t to say you can’t have an impact, your approach just needs a little massaging.
Misinformed Statements
Here is another one, “At my prior company I didn’t pay any 401(k) fees, I shouldn’t have to pay them in our plan.”
Surveys consistently cite that over 40% of retirement plan participants don’t believe they pay any plan fees.
Before you go down this path know that all retirement plans have fees.
Further, you can’t easily compare plan fees from one company, one plan or provider to another.
There are many variables and they can differ substantially.
The size of your company, the total money in their retirement plan are just a few.
The bigger the company and the longer their plan has been around the lower their plan fees should be.
There is a good chance that if you came from a large company with thousands of employees that has been around for years and move to a smaller, newer company with lower plan assets your fees will be higher.
Idle Threats
Last one, “Our 401(k) fees are so high I am not going to participate.”
With the trend of fee transparency on the rise in retirement plans you will see more information about plan fees on your quarterly statements, online or through fee disclosure statements in the future. More information about plan fees is supposed to be a good thing.
Don’t let it get you off track on what is the most important, saving consistently and investing appropriately.
Let’s come back to the “threat” you won’t participate because of high plan fees.
That has never made sense to me.
This means you will sacrifice your company match, tax advantages, higher contribution limits and the convenience of payroll deduction because you feel your plan fees are too high. I can’t make the math pencil out.
Neither can your company.
What To Do
First, recognize that your employer spends a lot of time and energy to provide you a retirement plan.
There is no law requiring them to offer you one. It is a voluntary employee benefit to help recruit, reward & retain valuable employees. With that in mind, if you are concerned about your retirement plan fees, start with some small amount of appreciation, it won’t hurt.
Next, approach the conversation constructively. Remember, you aren’t the first person to ask about plan fees.
Start with “I am not sure how to evaluate the fees in our plan, how do we determine if they are reasonable for a company and plan of our size?”
Or, “I understand the workplace retirement plan market place is very competitive these days, when was the last time we conducted a fee benchmarking or RFP to evaluate our plan fees?”
What comes from these questions should give you a good idea of how your employer approaches plan fees.
If you really want to get your employers attention, volunteer to join their retirement plan committee.
They might turn you down, but if you are given the opportunity you will quickly see the diligence and care most employers take when making decisions about your retirement savings.
In Closing
To lower your 401(k) fees, resist the temptation to complain, make misinformed statements or idle threats.
They might help you feel better in the moment, but they won’t start a constructive conversation with your employer about your retirement plan fees. Remember that 401(k) plans aren’t free.
By providing you a valuable benefit to save for retirement your company actually takes on significant compliance and legal risks which cost money to manage.
If you want to be a 401(k) change agent at your company, a little appreciation and a good question can go a long way.
