Many people know their 401(k) balance but could not tell you what the plan costs. That is understandable because retirement-plan fees can appear in several different places rather than as one obvious bill.

Start with the participant fee disclosure

The Department of Labor requires participant-directed 401(k)-type plans to provide information about plan administration and investment fees. The disclosure commonly includes general plan information, administrative expenses, individual charges and a comparative chart for the investment options available in the plan.

See the Department of Labor reporting and disclosure guide.

Look for three different layers of cost

1. Plan administrative expenses

These can include recordkeeping, accounting, legal, trustee and other costs of operating the plan. Some employers pay these costs. Others pass some or all of them to participants.

2. Investment expenses

Mutual funds, collective investment trusts and other plan investments can have ongoing operating expenses. For mutual funds and ETFs, the expense ratio is generally reflected in the investment’s returns rather than appearing as a separate debit from your checking account.

3. Individual service charges

Some plans charge individual participants for specific actions such as a loan, distribution, qualified domestic relations order or other transaction.

Find the expense ratio for each investment

Do not stop at the name of the fund. Review the expense ratio and, where applicable, the expenses of underlying funds. The SEC notes that ongoing fund expenses reduce investment returns and that small differences can compound into meaningful dollar differences over time.

SEC Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio.

Target-date funds deserve a second look

A target-date fund can be a convenient diversified retirement option, but funds with the same target year may have different asset allocations, glide paths, fees and performance. The Department of Labor specifically advises plan fiduciaries to review both the target-date fund’s costs and, when relevant, the costs of the underlying funds.

Department of Labor target-date fund guidance.

Do not judge a plan by fees alone

Low cost matters, but it is not the only consideration. Investment selection, diversification, employer matching, plan features, service quality and tax treatment also matter. A cheap plan can still be a poor fit, and a more expensive service can be worthwhile if it delivers meaningful value.

A simple 401(k) fee checklist

Locate the most recent participant fee disclosure.
Identify plan-level administrative charges.
Write down the expense ratio for each investment you own.
Check for individual transaction charges.
Review whether a target-date fund contains additional underlying fund expenses.
Compare cost with the services, investment options and employer match you actually receive.

Request a Retirement Income Review

Educational information only. King Life does not provide individualized investment, securities, tax or legal advice.