Here come the holidays! And if you’re like most Americans, you’ll be spending the most money this holiday season not on your family and friends…but on the company that administers your 401(k).

The sad truth is that tens of millions of Americans are overcharged every year by some of the biggest and most respected brand names in the financial services industry. It’s just the way the world works. Labor Secretary under President Obama once said “The corrosive power of fine print and buried fees can eat away like a chronic illness at a person’s savings.”  He also estimated that hidden fees cost American’s over $17 Billion per year!

Today, however, employees and employers alike are taking action, because they’re tired of playing Santa to Wall Street.

Here’s how to determine whether your company’s 401(k) plan—if you’re an employee or a business owner—is really giving your folks anything more than a lump of coal in their investment stockings.

Check Your Fees

Go to the fine print—there is a document that lists the fees that your 401(k) plan charges (including the cost of investments themselves).  Its technically called your fee disclosure and can usually be found wherever you log in to your plan or you can simply call customer service and ask them to email you a copy.  If your total fees are more than .75% annually, there’s a good chance that you’re being ripped off.

The process of uncovering your fees can be challenging because they often buried deep (surprise, surprise!).   There are free services like, which allows both employees and employers to upload their fee disclosure document and the company will do the digging for you.  They will also benchmark the plan to tell you if you and your company are getting a good deal…or getting hosed. 

Although fees sound like small percentages, they add up big.  For example,  if you get a 7% annual return over your lifetime, a one-time $10,000 investment will compound to $295,000 over 50 years.   But what if you have pay 2% in annual fees?  This takes your return down from 7% to 5% annually.  This means, your $10,000 investment would grow to just $115,000. Your nest egg was reduced by more than half!

Know What Funds are Available to You and How They Rank

Check and see whether your 401(k) plan offers low cost index funds. These are funds that essentially buy a basket of stocks and reflect the overall trend of the stock market (and studies show that they outperform that vast majority of mutual funds over time). Some of the big financial services firms either don’t offer them or they take those low cost funds and add massive markups.  So you may want to ask HR, or your business owner if it’s a small business, what kind of markup you’re paying for those index funds.

Every employer, big or small, is required by law to periodically “benchmark” the retirement plan they offer against other 401(k) plans.  In other words, it’s up to the employer to determine whether the fees employees are being charged for their 401(k)s are in line with reality or, as is all too often the case, totally out of whack.

If you’re an employee, and your plan does not match with these three criteria, it’s your job to contact your HR department if you have one, or your employer, and ask what’s going on. You have every right to have your plan benchmarked from time to time. So find out when was the last time this happened, and if it was a long time ago, then have them benchmark right away.

Small and medium-sized business owners need to realize that as the “plan sponsor” they most likely have fiduciary responsibility over their plans. That means that if something goes wrong, they are personally on the hook.  For most employers, providing a 401(k) plan is a necessity and just a box they check, instead of something which they delve deeply.  But if you’re a business owner and you are carrying that kind of exposure, you are basically walking naked down Main Street.

So what do you do if your employer isn’t offering 401(k) plans with fair fees and show an unwillingness to do anything about it? You can always sue, but most people don’t want to go to the time and trouble and put their jobs at risk. Although some of the top financial services companies and biggest employers in the country are now facing class action suits from employees over this very issue.

So get informed and be smart. As the end of the year approaches, don’t let the big financial services companies gobble up all of your cash.  Instead, keep your money home for the holidays…where it belongs.