When you issue to employees the first retirement plan fee-disclosure statements (Aug. 30) that list each and every plan fee, you can bet they’ll have a barrage of questions, concerns and complaints.
After all, for many, this will be the first time they’ll see just how much they’re paying for their 401(k) account.
Why it matters
And you can’t blame them for their concern. Even the smallest difference in fees can make a huge difference in workers’ total retirement savings.
The DOL uses this example to drive the point home: If an employee with 35 years to retirement and a 401(k) balance of $25K sees an average return of 7% and pays .5% in plan fees, he’ll have $227K socked away by retirement. However, if that same employee pays an average of 1.5% in fees, his 401(k) will only grow to $163K.
That’s why it’s critical for employers to start preparing now for worker’s questions and concerns.
Liz Rowell from the award-winning benefits communication provider Benz Communications, offers the following best practices when it comes to communicating your company’s 401(k) fees with employees:
1. Put it in perspective
At first glance, the fees workers are paying may seem a bit jarring to them. So make it a point to tell them the whole story.
Remind them about all of the features and tools their retirement plan includes — tax deferrals, company matching and all of the education tools your plan includes (financial education sessions, online tools, etc.).
Once they see all they’re getting for their money, they should be less upset by the fees.
2. Use tools at your disposal
Talk to your provider about the different ways you can show employees what they’re getting for their money.
Your provider may have online tools that can show employees how your company plan outperforms — and costs less than — individual accounts.
Or, better yet, your providers’ reps may be able to explain the differences between individual and group plans to your employees in person.
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