Question about 401K fees

[FI by 2024]

My brother recently qualified for his companies 401k and asked me for help deciding what to do. Since I use the TSP, I don't understand everything about his paperwork. Can someone help me answer this question?

In the screenshot of his paperwork, you see that the paragraph describes an "Administration Expense" that is pro rata. Then below that in the table it says the "Administration Fee" is $150/month. Are these two separate fees? Is it one flat fee of $150/month? One pro rata fee that is a percentage of $150/month? Something else entirely?

Any fees over $200/month would entirely wipe out his company match, leaving him with no benefit over an IRA and a lot of not great investment options. So if the fees are high, I might just direct him to an IRA. Beyond what I listed above, there are also a couple small ($5-10/month) fees.

Any help is appreciated. Thanks!

 

[DrRoy]

The way I read it the $150/mo is divided among all the plan participants. Have your DB ask the company to estimate the fee that he owes to be sure.

 

[Dash man]

I agree with DrRoy, the fee is divided among all participants based on the percentage the individual holds compared to the total sum if all investments of all individuals. Many times the company pays this fee. It's nothing to worry about. I'd be more concerned with the fees of the underlying funds in the plan. That's where you can get hurt.

 

[Sunset]

I agree with DrRoy, the fee is divided among all participants based on the percentage the individual holds compared to the total sum if all investments of all individuals. Many times the company pays this fee. It's nothing to worry about. I'd be more concerned with the fees of the underlying funds in the plan. That's where you can get hurt.

+1
Check the Management Expense Ratio's of the funds he can invest in. You might be amazed at how high they can be.
If he works for a large company, they are more likely to be reasonable.

 

[Hermit]

The fees can be all over the map. The fees I pay are literally pennies on a 7 figure account with megacorp. From what I have heard, others pay exorbitant fees. The only way to know is to ask and make sure all fees including fund fees are understood. Compare total fees to that using comparable Vanguard funds. It is some work to figure this out, but IMHO, it is much better than sharing a large portion of your hard earned savings with someone you don't even know.

 

[FI by 2024]

Thank you all! I've recommended he ask the company about the monthly fees.

Yes, the expense ratios are (IMO) quite high. The lowest is 1.11% and they go up to 1.87%. Like I said, he doesn't have great options which is why it might be better for him to choose another path.