Employers are not 401(k) fee experts and we need to stop expecting them to be. The average participant in a small employer 401k plan is paying 4% of their account to fees each year. 403(b) and 457(b) participants are faring no better. What employer would agree to such high fees if they had even the slightest understanding of what they were signing themselves and their employees up for? I submit that most employers know very little about 401k plans and sit on the same side of the table as you.
The internet has thousands of articles giving advice on how to play overlord to the fees in your workplace retirement plan. We’ve got articles like “15 Big 401k Questions To Ask Your Employer,” “3 Questions To Ask About 401k Fees,” “The 21 Questions You’re Going To Need To Ask About Investment Fees.” You can learn how to find fees. You can learn what the fees mean. You can learn how to selectively sidestep the highest-cost funds in your plan. I’m not saying the articles are not good and the advice not sound. But all the advice ends the same way. This is your plan. Your employer chose it. If it’s a bad plan, suffer through it or simply choose not to participate. After all, that is the system. In most workplaces one person decides for the entire organization where everyone gets to save their retirement dollars.
The time has come to move beyond that thinking and empower employees to work with employers to get a bad retirement plan thrown out the window and replaced with an entirely new plan. Now there’s a bright idea! Employers are people too. They are as much in the dark as your are about retirement plan fees and what to do about them. If they made a bad vendor choice the first time, how likely are they to want to go through that process a second time? They would rather put their head under the pillow and pretend that nothing is wrong. In my new book 401 CONFIDENTIAL I empower any employee at any workplace to assess the fees in their retirement plan and determine if they are reasonably low or flat out too-high. I then teach them how to work with management to secure lower retirement plan fees for everyone in the organization. Play the hero. Read 401 CONFIDENTIAL and then show your employer how to save money by switching everyone in the organization to a retirement plan with ultra-low fees.