Many workers here in the Houston area have never heard of the group of U.S. Labor Department rules known as ERISA, or the Employee Retirement Income Security Act. These laws protect workers' rights when it comes to pension plans, medical benefits, disability claims and other elements of an employee benefits package.
New ERISA laws governing 401(k) requirements went into effect on July 1, and Houston residents would be wise to familiarize themselves with these. Under the new laws, many hidden costs that workers pay for their 401(k) plans will now be exposed.
Many American workers are not aware that investment management, administrative and advisory fees are regularly pulled out of their 401(k) accounts. Until these new ERISA laws went into effect earlier this month, the exact fees were not disclosed to workers or their employers.
The disclosure will not tell workers the exact amount of total fees they have paid, but it will tell workers the amount of fees charged for every $1,000 invested. From that information, workers will need to calculate how much they are paying in fees.
A general financial guideline is not to pay more than 1 percent in annual fees--this means all of the 401(k) fees wrapped together should not exceed more than 1 percent of your total amount invested. However, there are a variety of factors that influence whether or not an investment fee is fair and reasonable.
Houston workers who think the amount of fees they pay is unreasonable may want to ask their human resources departments whether a competitive fee option is available. Some companies are legally obligated to offer this. Concerned workers may also want to talk to a financial planner and an employment law attorney if there is reason to suspect the employer is not complying with ERISA laws.
Source: Huffington Post, "Beware: Your 401(k) Plan Has Hidden Fees," July 2, 2012