An excerpt from a 73-page economic and policy analysis working paper, titled Large Bank Retirement Services: a comparative practices study, issued last month by the Comptroller of the Currency, Washington, the administrator of national banks.
In a defined contribution plan . . . retirement income depends on contributions to the plan and the investment return on those contributions. High fees and expenses will lower an investment's return and, consequently, retirement income.
The Office of the Comptroller of the Currency's study and several other recent studies of 401(k) fees show. . . plan participants may be paying a growing share of plan expenses. . . . In 1997, participants paid all investment management fees . . . in 56% of 401(k) plans compared with 44% in 1991. The share of plans requiring plan participants to pay fees also increased between 1991 and 1997 for audit fees, employee communication, record keeping, and trustee fees. For instance, participants paid all record-keeping fees in 35% of plans in 1997 and 22% of plans in 1991. They paid trustee fees in 40% of plans in 1997 and 27% in 1991.
. . . Expense ratios for growth and income funds for the year ending Oct. 31, 1996, ranged from a low of 19 basis points for an S&P 500 index fund to a high of 301 basis points for an actively managed fund, a difference of 282 basis points. The difference between the low and high expense ratios in the growth fund category was 629 basis points.
