American Funds Recordkeeping Services Agreement

In our experience, about 80% of the management fees collected by American Funds are paid through participation in turnover – a form of “indirect” fees paid on the operating costs of some investment funds. Participation in turnover increases the costs of an investment fund and thus reduces its annual returns. There are two basic forms: if you work with an external third-party administrator (TPA), you must include their prices in your calculation of American funds fees. You can find your TPA fees in a service contract or invoice. At American Funds, your direct expenses depend on the stock class of your funds as well as the total assets in your plan. To demonstrate the value of this valuation, you can find the pricing model in the “Appendix B: Pricing Plan” section of your Recordkeeper service agreement: To demonstrate the value of this appraisal, you should consider a 1.625.825.48,401(k) plan with only 7 participants from our 401(k) small business pricing study in 2018. While the all-in fee of $25,611.64 (1.58% of planned assets) was only slightly higher than the study average of 1.40%, the administrative fee of $2,521.81 per capita ($17,652.64/7 participants) was about six times higher than average! Direct fees are the most transparent and are probably the ones you`re most familiar with. In order to make it easier to compare your fees with other plans, we advise you to express this figure as a percentage of the plan`s capacity. In our example, this figure is 1.57% ($10,720,40/$681,866,17).

While their per capita management fees are already above the average of US$422.30, this figure can easily be much higher due to the way these fees are collected. During this time, you should have a full breakdown of your American funds 401(k) and how they are calculated. In our most recent Small Business 401(k) Fee Study, we found that American Funds plans cost small businesses an average of 1.56% of the plan`s assets each year, with a total of about $502.44 per participant. After charging your all-in fees, we advise you to take a look at your american funds management fees on a per capita basis (i.e. the number of employees). In step 4, add it to a table with your TPA fees (if any) to calculate the direct fees collected in your American Funds plan. To calculate your American Funds 401(k) fees, you need at least 3 documents: Doing this for US funds can be a bit painful, but don`t worry – we`ll show you everything you need to do in 4 simple steps. Excess administrative fees – basically, which exceed your provider`s service level of 401(k) – may not be easily visible if they are evaluated solely on an all-in basis with investment costs. This is especially true if your plan has a lot of assets. First, enter in the table the fund information from your American Funds 408(b)(2) and asset statement.

Once all the information is available, the formulas automatically calculate your indirect costs. To make it easier for you, we`ve created a table that you can use with all the columns and formulas you need. All you need to do is find the information for your plan and then copy it into the table. Neither the 12b-1 fee nor the outsourcing fee is shown as hard dollar amounts on opening the US funds, making them really easy to ignore. Instead, these “hidden” fees are shown as a percentage of assets (each stock class has a different percentage) in the “Investment C: Investment Option Payments to Financial Professional`s Service Provider, TPA and Brokerage Firm” section of the Recordkeeper Services Agreement: If you take compound interest into account, these rising fees can make a big dent in your retirement provision. Therefore, you want to do everything in your power to avoid paying them. Just upgrade to a 401(k) provider that collects fees as much as possible based on headcount and not assets. Such a pricing structure will make it easier for you to contain your 401(k) fees if your plan grows….