Avoiding 401-Chaos
By Vanessa Drucker

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Costs and Contributions
Free lunches are hard to come by, but 401(k) plans offer some bites. Almost all employers continue to pay all the expenses incurred by the plan, with the exception of investment management fees. Expense categories include education, administration, audits and legal fees. Gradually, as plans increase in size, participants are being hit with a larger share of the bill. But don't lose sleep, says Sternklar. When the money sums are so huge, expenses can be thinly spread. Because many fees are easily tucked away, the Department of Labor insists on disclosure of all administrative costs. Surprise, surprise - about half the plans disclose the full details only on specific request.

Employers should be aware of all the above features in different plans. Yet it appears that the only single element employees deeply care about is the level of employer contribution. The most common employer 401(k) match is 50 cents per dollar, according to Hewitt, but 19 percent provide a dollar per dollar match, up 5 percent since 1997. Hewitt also finds participation rates in plans with matching or discretionary employer contributions "are higher on average than plans where there is no employer contribution, and that all other key features and characteristics "appear to have little influence on participation rates."

Aside from participation levels, how can an employer assess how satisfied its employees are with its 401(k)? The simple answer is to ask the HR department, which will be the first place to hear complaints. By considering all the main elements - investment choices, servicing, information and costs - employers should be able to select a plan that offers the benefits of balanced, long-term investing.

Vanessa Drucker is a New York-based business writer.