Back in March, I wrote Uncover The Hidden Fees In Your 401(k) Plan. Because the hidden fees are so hard to pin down, I gave a method which helps find out if there are hidden fees in the plan and if so how much the hidden fees are.
- Find in your plan’s menu one fund that you are not using.
- Do a one-time transfer and move $100 to it. Do not include this fund in your periodic payroll contributions.
- Wait until a full quarter passes. On your next quarterly statement you should have the beginning and ending balance for that fund.
- Calculate your gain/loss in that fund. Compare your actual gain/loss with the fund’s reported performance in the quarterly statement.
I did this test in my own plan. Before the end of the first quarter, I transferred a small amount to a fund I wasn’t using. During the second quarter, I did not add any more money to the fund. The money sat in the fund untouched for the entire quarter. Now I’m able to calculate my gain or loss and compare it with the performance reported by the fund.
According to my online account information, I had $99.77 in the test fund as of March 31, 2008 and $97.04 as of June 30, 2008. My gain/loss in the 2nd quarter was 97.04 / 99.77 – 1 = -2.74% in that fund. According to the mutual fund’s web site, the fund’s performance in the 2nd quarter was also -2.74%. My loss in the fund wasn’t any larger than what the fund reported. That means there were no hidden fees deducted from my account during the quarter. Yay!!!
Did you also do this experiment? Do you know if there are hidden fees in your plan?