If you need help figuring out new Department of Labor rules for 401(k)s, you're certainly not alone. The department's highly publicized Rule 408(b)2, which dictates fee-transparency and was instituted over the summer, is now in full swing. Assisting curious clients about the true costs of their retirement plan can be time consuming, and there's always the possibility of getting it wrong.
Open architecture 401(k) provider Lincoln Trust Company introduced its Personalized Expense Ratio Calculator (PERC) on Tuesday, an online tool that helps participants in any 401(k) plan determine what they're really paying for the privilege of saving.
"We've taken a report that we previously provided our clients and now allow outside parties to plug in the same type of information to get an idea of what they're paying for their plan," said Tom Gonnella, executive vice president of Lincoln Trust. "It should be pretty powerful information for them."
The PERC, available on the Lincoln Trust Website, walks investors through a five-step process to calculate and benchmark the real cost of their 401(k) plan. That sounds great, but with a plethora of online calculators available to help with everything from how much a client will need for retirement to a suitable withdrawal rate, how does this one stand out?
"There's really two fronts on which these required [DOL] disclosures have failed," Gonnella responds. "The biggest by far is the investments. A Deloitte study finds that 84% of plan costs are within the investments. Nowhere in the regulations do they get specific around the investments, other than calculating per $1,000 what your expense ratio would be. That doesn't even get close to what the participant, in particular, or the plan sponsor would need to understand."
