An Employee s Guide to Retirement Plan Fees and Expenses

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1 An Employee s Guide to Retirement Plan Fees and Expenses

2 This guide was developed to help you gain a better understanding of the fees associated with a company sponsored retirement plan. Section 404(a)(1) of ERISA requires plan fiduciaries, when selecting or monitoring service providers and plan investments, to act prudently and solely in the interest of the plan s participants and beneficiaries, and for the exclusive purpose of providing benefits and defraying reasonable expenses of administering the plan. Thus, a plan fiduciary must have sufficient information regarding fees and compensation that the service provider receives and whether there are relationships or interests on the part of the service provider that may call into question the objectivity of the service provider in providing services to the plan. Pending fee disclosure legislation provides that information concerning those services and costs must be disclosed without regard to whether services are furnished as part of a bundle or package. Your Trust Point plan is an all inclusive bundled service solution, which is normally more transparent than having multiple service providers. At Trust Point, we believe this legislation is long overdue. Not only do we applaud it, we live it every day with our 100% Total Fee Disclosure policy, our policy to accept no soft dollars, and our independent status. For additional information, please contact your employer or your Trust Point Relationship Manager at (608) or toll free at (800)

3 Administrative Fee (Participant Based) The day-to-day operation of a 401(k) plan involves many behind the scenes activities to ensure that participants receive accurate information and easy access to their account. The Administrative Fee is charged to cover the expense of required plan functions such as recordkeeping; transaction processing; distribution processing; statements; accounting; plan sponsor reports; legal and trustee services. The Administrative Fee also covers the additional services offered such as participant education; website access and retirement planning tools. Fees are calculated by taking the annual administrative fee for the plan and dividing it equally by the number of participants. Fees are processed quarterly. $3,600 annual fee 100 participants $36.00 per participant $9.00 per quarter Direct Participant Fees (Special services) Distribution fee Charged to withdraw money from the plan Loans (if allowed) Fee charged to process and service loan QDRO Service fee associated with a Qualified Domestic Relations Order

4 Investment Management Fee (Asset Based) Trust Point employs a rigorous screening process when selecting the funds that it offers. Your company decides which of the approved funds to include as investment elections. Our portfolio managers continually review, monitor and modify the funds that are offered in your plan. Participants can choose to manage their own accounts or select actively managed Trust Point Profiles, which are diversified asset allocation models based on risk and reward. The Investment Management fee covers the costs associated with selecting and managing your plan s investment options. The fee structure is determined by the overall size of the plan and the rate is tiered based on the assets under management. The fee percentage decreases as plan assets increase. Fees are determined by taking the calculated plan basis point fee and multiplying it by the individual participants account value. Fees are processed quarterly. $25,000 account x.005 basis points $125 annual fee $31.25 per quarter Basis points (bp) refer to numbers less than 1%. 1 basis point = 1/100 of a percentage point 50 basis points =.005

5 Mutual Fund Related Fees (Asset Based) At Trust Point, our independence and objectivity allow us to put our clients interests ahead of our own. We are not affiliated with any insurance company, bank, brokerage house or mutual fund company so we have no products to sell you. In order to ensure our independent status, we do not accept any form of kick backs or soft dollars from mutual fund managers. Soft dollars are revenue sharing agreements between mutual fund companies and service providers which are hidden in the fees paid by participants. The investment options within your plan are no load funds which mean you are not paying any type of commission or transaction fee to purchase these funds. Some retirement plans use retail or load funds, which mean the participants pay a fee to purchase funds each time they contribute to their account. These sales charges are used to compensate the broker/advisor in addition to other plan fees. Commissions may be collected upfront (A shares); collected on the back end (B Shares) or collected for as long as you own the fund (C Shares) and are in addition to normal fund operating expenses. All mutual funds have expenses associated with managing the fund. These are commonly referred to as expense ratios. Fund expenses include management fees; marketing and distribution fees (12b-1 fees are soft dollars paid on an ongoing basis to the broker/advisor) and administrative fees.

6 Mutual fund expense ratios are deducted from the returns of the fund and calculated as basis points. These expenses can have a huge impact on your retirement account over time. Trust Point uses only institutional class shares which in addition to being no-load also have lower expense ratios than retail mutual funds. Institutional funds are only available to large investors such as Trust Point. The box above illustrates the expense ratios of the exact same fund in different share classes. The difference between a C share and a F2 or institutional share is over 1% annually, which is the amount that your return is reduced by each year. For more information on the expense ratios of funds in your company sponsored plan, visit the Trust Point website at From the website you can download a current prospectus or be linked directly to Morningstar mutual fund research.