The Associated Press

Companies offering 401(k) plans are increasingly scrutinizing the fees they're charged by service providers as a result of lawsuits and government regulation.

Identifying fees can be tricky. Some are charged as flat dollar amounts, some others are charged as a percentage of invested assets.

There are numerous service fees that are paid out of 401(k) accounts, which are generally straightforward and easy to understand. But there are also several indirect fees that may be charged. Here's a rundown of the types of fees you should be aware of.


1. Trustee. A 401(k) plan must name a trustee to handle contributions, plan investments and pay outs. An employer may handle this internally or hire an outside company.

2. Recordkeeping. This fee is charged for making sure transactions in a 401(k) program are credited to participant accounts accurately. This can be done in-house by an employer or hired out to a recordkeeping company.

3. Administration. Oversight of the retirement plan often covers accounting and legal services and may include access to customer service representatives, education, retirement planning software and electronic access to accounts. May be deducted from investment returns or charged as a percentage of a plan's assets.

4. Investment Advisory/Investment Management. Ongoing charges for managing assets of the investment fund. Usually charged as a percentage of assets invested.


1. Soft Dollars. Extra commission charged by brokerage firms to pay investment advisers and others to purchase services, such as investment research. Charges must be reasonable and match the services provided. May be called SEC Rule 28(e) fees for the Securities and Exchange Commission rule that regulates them.

2. Sub-transfer Agent Fees. Brokerage firms and mutual funds often subcontract recordkeeping and other services related to participant shares to a third party called a sub-transfer agent. The fee must fairly represent the value of the services.

3. Distribution expenses. These are commonly called 12b-1 fees. They may include commissions to brokers, advertising or other marketing expenses, and fees for administrative services provided by third parties to fund shareholders. They cannot exceed 1 percent of a fund's assets on an annual basis.

4. Sales Charges. Also known as loads or commissions, these are transaction costs for buying and selling investment products.

5. Revenue Sharing. Mutual funds or other investment providers sometimes pay, out of the investment returns of an account, other plan service providers, a recordkeeper or other third-party administrator, for performing services that the mutual fund might otherwise be required to perform. These relationships have been questioned and prompted lawsuits because some participants consider them similar to kickbacks.

Sources: Marcia Wagner, The Wagner Law Group, Boston; The U.S. Department of Labor

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