If youve been carefully tucking money away in a 401k plan and dreaming of the day you can retire, you may be shocked to learn that money is being withdrawn from your accounts without your knowledge.

Beware of Hidden Fees

Before you call the police, youll need to understand how 401k plans work. A number of administrative fees are built into and deliberately buried within the plans. Twenty years ago, the cost of administrating a 401k was the responsibility of the employer. Today that burden has shifted to the employee. Its up to you to do the detective work to ferret out the hidden fees so youll know exactly what you are paying for.

The Disclosed Fees

Its relatively easy to find the first set of fees you are paying. If your plan invests in mutual funds, look at the expense ratio, which is found in the prospectus. These fees are commonly referred to as management fees. Participants are usually familiar with them, as they are routinely disclosed by plan administrators and employers.

The Hidden Fees and How to Find Them

Administration fees are the fees that most participants dont know about. They are in addition to the management fees, but much harder to find. Heres where to look:

1.    Transaction History. Look at your transaction history for removal of partial shares. If you see a transaction that doesnt look familiar, you can bet that the shares are being removed as part of an administration fee. Dont be surprised to find that the plan is routinely removing enough shares to cover a standard fee on a regular basis.

2.    ERISA filing. If you cant find any fees in the transaction history on your account statement, ask your human resources department. Most companies, depending on size, need to report the expenses of employee benefit plans to The Department of Labor in an annual Form 5500 filing. The filings are available to the public.

3.    Employer. Dont expect your employer to give you the answers you are really looking for. Because employers and 401k providers negotiate packages, chances are they wont tell you all the options they had to choose from and whether or not they picked the least expensive option. The reality is that you may never know how much of your retirement money is being eaten up by fees.

The $660,000 Example

The Street recently detailed an example that shows the long term impact from fees:

A 25-year-old employee who currently has around $25,000 in his or her retirement account, and whose annual contributions (and employer matches) total only $2,500, in a plan that is allocated 80% to stocks and 20% to bonds, could forfeit more than $660,000 by age 65 if the plan charges excess fees totaling just 1% a year.

Saving More Can Penalize You

Personal finance experts will tell you that the most surefire way to make sure youll have money for retirement is to put as much as possible into an interest earning savings account within your 401k. Makes sense, but believe it or not, your employer could be penalizing you for being a good saver! Fees are often charged as a percentage of balance. Diligent savers pay much more than people with lower balances. Shouldnt administrative fees be the same for everyone? After all, mailing costs and administration procedures wouldnt change based on the size of your account. However, if you have a large balance because youve done a good job at saving, youll be taking a bigger hit.

What Other Options Do You Have?

Of course if the bill doesnt pass, or until it actually does, you should be evaluating your options. Unfortunately, youre pretty much tied to your 401k plan since your employer provides it as an employee benefit. However, here are some things you can do:

• Utilize an IRA to save some money. See the comparison between a traditional IRA versus a 401k to determine which retirement saving option is right for you (taking into consideration the 401Ks employer match).
• Use the 401k shaft detector. This money management spreadsheet helps you determine if your 401k is the best option for retirement savings. The spreadsheet was created almost 9 years ago, but the calculations still work as long as you enter the correct tax brackets.
• Determine if your employer adopted an amendment to permit in-service, non-hardship withdrawals. This amendment will allow you to roll over your 401k money to an IRA .
• If you switch jobs, compare the costs of moving your money to an IRA instead of leaving it with your old plan or rolling it into your next one.

Be sure to provide feedback to your benefits department about your 401k plan. Ask them questions and voice your concerns. After all, your 401k plan is part of your compensation package and you should take responsibility for it, just as you would for your salary and other negotiable benefits.