Letter to Participants
If you are a participant in your company’s retirement plan, here is a letter you can write to your human resources department or whoever is responsible for overseeing the plan which contains a list of questions that will help you determine the nature and extent of the fees that are being taken out of your retirement account.
To: Human Resources Department
From: Your Name
Re: My Retirement Plan
Dear ________ :
I am in the process of reviewing my retirement plan and I am trying to gain a better understanding of all the fees I am paying in my plan. I have the following questions:
- What are the expense ratios of the funds I own?
- What have I been charged each year since I've been a participant in the plan for recordkeeping, custodial, administration, and investment management fees in hard dollars? How do I find this information on my account statement?
- How are these fees being assessed? Am I paying a flat fee for these services? Or are these fees based on my account value or are they included in each individual fund? If the latter, do some funds have different recordkeeping, administrative, and investment fees than others?
- If I am not interested in utilizing the services of the investment advisor, can I opt out of this fee? For example, can I choose funds in each available asset class that don’t include investment advisory fees?
- I’ve watched a 60 Minutes, and Bloomberg TV News video and read an article in the Wall Street Journal stating each fund incurs significant trading costs that are not included in the mutual fund’s expense ratio which are deducted out of my account. I have also learned that these costs can be found in the statement of additional information. Can you provide that statement to me for each fund that I own?
- I have also watched a PBS Frontline video which raised a concern about financial advisors that do not act in a fiduciary capacity and therefore legally cannot provide advice in spite of referring to themselves as advisors. Does the financial advisor for our plan act in a fiduciary capacity? If so, does the advisor serve as a 3(21) or 3(38) fiduciary and is the advisor and/or record keeper (this is the party who provides our website, sends out statements, and keeps track of our balances) willing to charge a flat dollar fee so my fees don't increase as my account value grows?
- In addition, I have learned that there is a total stock market index fund available in retirement plans at a cost of 0.05%. Is this fund available in our plan?