WAYNE, PA — Beacon Financial Services, a corporate retirement plan and personal wealth advisory firm based in Pennsylvania, recently unveiled a groundbreaking white paper titled “The Hidden Fee Manifesto: Exposing some of The Biggest Secrets of the 401(k) Industry.” This document aims to guide plan sponsors through the intricate landscape of 401(k) fees and the risk and liability they could face if these fees are not properly monitored.
The release of the white paper comes at a critical time. In 2022, 40% of excessive fee lawsuits filed were related to plans with less than $1 billion in assets, according to legal news outlet JD Supra. This trend underscores the need for vigilance and proactive measures by 401(k) plan sponsors of all sizes.
Moreover, President Joe Biden recently proposed new measures to protect Americans’ retirement savings from hidden and excessive fees. A statement from the White House highlighted the concern, stating, “America’s families spend a lifetime saving so they can retire with dignity. But junk fees are chipping away at their savings…” This announcement signals a future of increased oversight for fiduciaries managing these plans.
Brian Menickella, Managing Partner of Beacon Financial Services and a retirement contributor at Forbes, weighed in on the issue. “401(k) plans are structured to compensate associated vendors and intermediaries for the services provided to the plan. They do deserve fair compensation for their vital contributions,” said Menickella. “However, when there is a lack of transparency on how these vendors are compensated, plan participants can be subjected to unnecessary or unreasonable fees hidden within the plan’s investments.”
The Hidden Fee Manifesto particularly highlights revenue sharing, described as a deliberate overcharge at the fund level, which is then shared with other vendors to cover a plan’s administration costs or financial advisor broker commissions. The white paper advocates for plan sponsors to commission a third-party fiduciary to conduct a fee analysis. This analysis typically involves a comprehensive review of the funds’ prospectuses and expense ratios, benchmarking them against other funds in their peer group to determine reasonableness based on cost and performance.
With the launch of The Hidden Fee Manifesto, Beacon Financial Services continues its commitment to transparency and financial education, providing valuable tools for navigating the complex world of retirement planning.
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