Hidden 401(k) Fees Are Stealing Your Nest Egg

There are two pressing issues regarding costs: Whether the costs translate into better performance, and whether the costs are being fully and fairly disclosed.

Regarding the first, the evidence is fairly clear. "High cost fund managers do not outperform low-cost managers," Wagner said. The evidence overwhelmingly supports the case for low-cost index funds and lower cost actively managed funds, yet a number of 401(k) plans don't provide a diverse group of low-cost funds.

The second issue is trickier. John Collins, a spokesman for the fund industry trade group Investment Company Institute, acknowledges that "participants should have a way to know everything they are paying for, or what they're employer is paying for."

While regulators and legislators debate the need for greater disclosure of fees, the issue is greater simplicity in fee disclosure. The best solution for participants: A personalized explanation of how much their 401(k) plan costs.

GAO's Hillman says the fund industry's claim that the costs of preparing such a personalized explanation are too onerous "doesn't ring true. We've calculated that it would cost $1.35 per account, and much of those costs are nonrecurring -- we think individuals would gladly foot the bill for that information."

Benna, the founder of the 401(k) plan, believes better-quality disclosure is essential -- and the 401(k) participants should demand it. "On the participant statement, it should be specifically disclosed in dollar terms what gets paid and to whom," he said.

At the very least, a reasonable solution, many 401(k) experts say, would be a simple, prominently displayed comparison of the average dollar cost of a $10,000 investment, compared with similar service providers' plans. It speaks volumes that one of the lowest-cost providers of 401(k) investment services, Vanguard, doesn't have much difficulty with this level of cost disclosure.

"It is impossible to argue that uninformed investors are better investors," said Wagner.