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Survey: New 401(k) Fee Notices Causing Confusion Among Small Business Owners

Eighty-Three Percent Still Have Questions about Fees and are Unsure What to do Next, According to National Survey by ShareBuilder 401k

09/12/2012:
SEATTLE — This summer the U.S. Department of Labor U.S. Department of Labor put new rules in place to make it easier for 401(k) plan sponsors and participants to understand how much they’re paying in 401(k) fees. But a recent national survey of small business owners conducted by ShareBuilder 401k found many plan sponsors are still feeling confused when it comes to understanding the costs within their plans – and are unprepared for questions from their employees.

“Our survey results suggest many small business owners are still in the dark when it comes to their 401(k) plans and costs, demonstrating our industry has more work to do in disclosing fees transparently and in ways that are easy to understand,” said Stuart Robertson, President of ShareBuilder 401k. “Everyone has a right to know the fees they’re paying for their 401(k) as over the course of a career, paying an extra percentage point can shrink your nest egg by hundreds of thousands of dollars.”

Following are some of the survey’s top-line findings:

The new reports are going unnoticed by many. While the majority (92 percent) of small business owners claimed to be aware of the new rules requiring 401(k) providers to distribute documents fully disclosing all plan fees, only 60 percent recall receiving the new documents at all.

The new reports are leading to confusion, not understanding. Of the small business owners who did recall receiving new fee disclosure documents, the average time spent reviewing the documents was 16 minutes, and the vast majority (83 percent) walked away with questions about what their company should do now. Additionally, sixty-eight percent say they are not fully prepared to answer employee questions about their plans.

Small business owners are taking action, but not ready to switch plans. More than a third (37 percent) of the survey’s respondents have hired, or plan to hire, a consultant to help them to understand their options, and nearly as many (34 percent) have gathered, or plan to gather, benchmarking data to help them compare alternate retirement plans for their company. However, despite increased transparency, few business owners are using this as an opportunity to negotiate their plan with their current 401(k) provider (33 percent) or to shop for a new plan provider (26 percent).

Small business owners are unsure of what is a fair 401(k) fee percentage. Fees are typically based on a percentage of a plan's total assets, and on average, small business owners say they think four percent is a fair rate – which is significantly higher than the average 401(k) fee percentage, demonstrating lack of awareness about the options available and the impact fees can have on long-term savings.Small business owners are unsure of what is a fair 401(k) fee percentage. Fees are typically based on a percentage of a plan's total assets, and on average, small business owners say they think four percent is a fair rate – which is significantly higher than the average 401(k) fee percentage, demonstrating lack of awareness about the options available and the impact fees can have on long-term savings.Small business owners are unsure of what is a fair 401(k) fee percentage. Fees are typically based on a percentage of a plan's total assets, and on average, small business owners say they think four percent is a fair rate – which is significantly higher than the average 401(k) fee percentage, demonstrating lack of awareness about the options available and the impact fees can have on long-term savings.

“At ShareBuilder 401k, we advocate for one percent or less in fees regardless of company size, so it was startling to see such a high percentage of business owners believe paying more than one percent is fair,” said Robertson. “The first thing employers will want to do is compare the costs of their current 401(k) plan versus a plan that is one percent or less – we provide a simple online tool that most employer can complete in 5-10 minutes with their fee disclosure document at www.401kcomparison.com.

ShareBuilder 401k offers a selection of free online tools designed to help plan sponsors and participants better understand their 401(k) plans, the fees they are paying, and what to do if they are paying too much. Employees can visit www.401kfeefighters.com, and employers can find tools at www.401kcomparison.com or by simply visiting www.sharebuilder401k.com for more information.

Survey Methodology The ShareBuilder 401k Survey was conducted by Wakefield Research (www.wakefieldresearch.com) among 500 small business owners and decision makers offering 401(k) plans at companies with 100 employees or less, between August 17th and August 27th, using an email invitation and an online survey.

Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. For the interviews conducted in this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 4.4 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.

About ShareBuilder 401k ShareBuilder 401k provides easy-to-use, cost-efficient 401(k) retirement plans for small businesses ranging from the self-employed to those with 500 or more employees. ShareBuilder 401k is a leader in providing 100 percent index-based ETF investments (plus a money market) in 401(k) plans. ShareBuilder 401k offers a suite of on-demand services that make it simple for employers and employees to open and manage their retirement plans online at www.sharebuilder401k.com. ShareBuilder 401k plans provide market-efficient investments and model portfolios that make it easy for employees to select smart investments to help them get on track to meet their retirement goals. Customers can also take advantage of ShareBuilder 401k consultants, customer success managers, and customer care agents to receive assistance in choosing and managing their retirement benefits.

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Media Contact
Alison Cahill Rouse
917-653-7592
mediainq@sharebuilder.com

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