Financial Planning The Supreme Court Ruled on Your 401(k)…and It’s Good News Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint.com Published Jun 26, 2015 3 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. A couple of months ago, a friend asked me for help choosing investments in her 401(k). Unfortunately, the investment options were a collection of expensive, actively managed mutual funds, some with sales charges. The only silver lining was her employer’s matching contribution, which is always a fantastic offering. The price you pay for your investments is very important, yet many people aren’t aware of their retirement account fee structure. Expensive funds can cost a person tens of thousands of dollars (or more!) in fees and expenses over a career. I advised my friend to contribute enough to get the full match, contribute more to an IRA, and ask her employer’s benefits administrator to add some low-cost index funds to her plan. Tibble v. Edison Luckily, having low-cost funds at your disposal just got much easier. A recent unanimous Supreme Court decision found that retirement plans that offer expensive investments when cheaper, comparable ones are available are violating Federal law. So what did this mean for you? The court’s decision was relatively narrow. The plan under scrutiny in this case was offering retail-priced funds when institutional-priced funds were available. In other words, they were forcing employees to buy an expensive product when the exact same product was available at a lower price (kind of like a name brand prescription drug vs. a generic brand.) That’s illegal, because a 401(k) plan administrator is a fiduciary. A fiduciary means they’re required by law to make decisions in the best financial interests of the employees who keep their retirement savings in the plan. They’re not allowed to use the plan to enrich their employers or themselves. The court didn’t weigh in on how much is too much for a plan to charge, or whether a plan is required to offer index funds. But they offered a glimmer of hope and legal muscle to anyone saddled with a less than ideal 401(k). How do you know if your 401(k) has lousy investment options? Names and numbers. A good plan will offer a variety of index funds (usually with “index” in the name), with an expense ratio of 0.2% or less. The expense ratio tells you how much the fund charges you per year, as a percentage of the money you keep in that fund. Since the cheapest funds charge under 0.1%, anything over 1% is more than ten times as expensive — and sadly common. The plan is required to disclose the expense ratio of each fund, but it’s not always in the same place. It might be found as a column in the list of investment options on your online benefits site, or you might have to click through to the specific fund. Even if you find your plan is overpriced, you should still take advantage of your 401(k) to save for the future, especially if there’s an employer match. But it’s worth your time to send a note to the benefits office and ask for index funds. It could make a huge difference to your retirement stash down the road when you’re ready to use your money. Previous Post Financing Your Furry Friend [Infographic] Next Post My Mint Story: I Was Ready for the Worst Case… Written by Mint.com More from Mint.com Browse Related Articles Mint App News Intuit Credit Karma welcomes all Minters! Retirement 101 5 Things the SECURE 2.0 Act changes about retirement Home Buying 101 What Are Homeowners Association (HOA) Fees and What Do … Financial Planning What Are Tax Deductions and Credits? 20 Ways To Save on… Financial Planning What Is Income Tax and How Is It Calculated? Investing 101 The 15 Best Investments for 2023 Investing 101 How To Buy Stocks: A Beginner’s Guide Investing 101 What Is Real Estate Wholesaling? Life What Is A Brushing Scam? Financial Planning WTFinance: Annuities vs Life Insurance