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My company just sent out a Participant Fee Disclosure document for my 401(k) plan. In an attempt to understand my finances better, I am reading it through carefully. Thanks to a lot of the posts on here, most of it makes sense, except the line I've bolded below:

Under Administrative Expenses - Plan-Level Expenses/Credits,

A portion of these services are paid from the plan's expenses. This is reflected in each investment's expense ratio and reduces the investment returns. If an additional amount is required to cover your plan's administrative expenses, your employer expects that it will be paid from the plan's forfeiture assets or from the general assets of your employer.

This plan may also incur unexpected expenses that may be deducted from participant accounts.

If your plan's investments generate more revenue than is necessary to cover the costs of administrative services for your plan, the excess amount will be used to pay other plan expenses or allocated to participants and will appear on your quarterly statement.

I've read What expenses do 401k funds charge? and 401(k) plan/investment fees: Are they the expense ratios, or something else as well? but the fees described in those are, if my reading is correct, already covered explicitly elsewhere in the document (and I wouldn't call them "unexpected").

So my questions are:

  1. Does "from participant accounts" mean they would deduct specifically from my 401k?
  2. What sort of "unexpected expenses" might they be taking out?
  3. Is this typical? (My company's HR is notoriously cheap.)
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    IANAL, but it sounds like indemnification language. They are saying they have the option to charge expenses to participants if they would like. Could be from legal fees or admin expenses from plan failures/corrections. We have language in our PFDs that say in the absence of revenue-sharing a participants' share of expenses may be higher. What does it explicitly say about who pays admin expenses? What does the rest of that section say? It's hard to tell just from one line. And yes, 'from participant accounts' means they have the authority to deduct from your 401k account. – Chris Oct 21 '16 at 15:23
  • @Chris Hmmm. Thanks for the comment - I've added the other paragraphs about admin expenses. – user40002 Oct 21 '16 at 16:03
  • If so, that seems awfully sketchy to me (they can just charge me for random unspecified stuff? I guess I need to be reading my statements carefully?). But I'm still learning how this all works.. – user40002 Oct 21 '16 at 16:07
  • IMO, less sketchy, more they are covering their bases. I've seen a few other plans do this too. They could just explicitly say that participants will pay ALL plan-related expenses. At least here they are saying expenses are expected to be paid from forfeiture or by your employer first. – Chris Oct 21 '16 at 16:42
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    As an example of an unexpected expense, we just went through a whole document restatement process. All documents had to be updated for PPA per IRS regulations. We charge some amount of money to restate a document, but the sponsors weren't expecting it because they didn't request it. It was an extra admin expense that was out of their control, but still a plan-level expense. – Chris Oct 21 '16 at 16:53
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IANAL, but it sounds like indemnification language.

They are saying they have the option to charge expenses to participants if they would like. It should say explicitly (you mention that it does) who the 'default payer' is.

Unexpected expenses could be anything that's not in the normal course of business. I know that doesn't help much, but some examples may be plan document restatements or admin expenses from plan failures/corrections. We have language in some of our PFDs that say in the absence of revenue-sharing a participants' share of expenses may be higher. Yes, 'from participant accounts' means they have the authority to deduct from your 401k account.

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