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Three 401k trends for 2012

Participants in 401k's will get a better idea of how much they're paying in fees for their plan.

By MSN Money Partner Jan 9, 2012 10:04AM

This post comes from Catey Hill at partner site SmartMoney.


SmartMoney on MSN MoneySeveral important changes go into effect this year which may be of interest to those planning for -- or nearing -- retirement. SmartMoney talked to Tom Gonnella, senior vice president of corporate development for Lincoln Trust, to get an idea of the retirement industry trends for 2012.


401k fee disclosure. A February 2011 study by AARP (.pdf file) found that 62% of participants were unaware of how much they were paying in fees. A new Department of Labor regulation that goes into effect on April 1 -- probably the most significant of the 2012 trends -- may help change that by requiring plan sponsors to reveal this information to participants. Post continues below.

While these new rules are a "step in the right direction, they fall short of full fee disclosure," says Gonnella. The reason: "Notably, the disclosure of investment costs actually incurred by participants -- typically the single largest plan expense -- is not required by DOL regulation," he says. The DOL only requires the disclosure of the expense ratios and the amount per $1,000 that it would cost participants to be invested in the fund, leaving the burden on the participant to perform the calculations to determine their investment expense.


Bottom line: "This is a good first step, but it's just a baby step," says Gonnella. For a detailed explanation of what this means and how it will impact you, click here. For more information about how to dig into the fees you may be paying, click here.


Rise of 401k evaluation services. The 401k disclosure rules will most likely lead to increased demand for services that will help plan sponsors evaluate the true cost of 401k offerings, says Gonnella. "Plan sponsors may hire more advisers so they can uncover fees," he says. Furthermore, 401k evaluation services will be offered by a range of service providers, not just advisers -- from plan consulting firms to insurance agents, he adds.


Lowered popularity of target date funds. Many advisers predict that, at least in the short term, volatility is the "new normal." This potential for volatility "will continue to push plans out of the 'one size fits all' target date fund offering and into customized asset allocation models that more accurately reflect plan and participant needs," says Gonnella.


More on SmartMoney and MSN Money:

Jan 10, 2012 6:14PM
"they fall short of full fee disclosure.......Notably, the disclosure of investment costs actually incurred by participants -- typically the single largest plan expense -- is not required by DOL regulation"

no doubt!  let's not let the captive crowd be aware of just how much of our cash is skimmed off the top!  especially when there's so many other topics that the salesmen can "blame" for such poor returns the past 10 years


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