You soon may be able to move savings from a regular 401(k) retirement account to a Roth 401(k) thanks to a new law aimed at keeping workers within the company plans.

Taxes Now or Later on Retirement $

Those who make the move to the Roth 401(k) version, which will be available at companies with both types of 401(k) accounts, will pay taxes now rather than later. Until recently, this wasn’t possible in a 401(k) plan, although there have been ways for savers to shift money from a traditional individual retirement account to a Roth IRA and from traditional 401(k) plans to IRAs.

Why would someone want to consider shifting 401(k) assets this new way? With income taxes expected to rise, many advisers are encouraging clients to consider ways of reducing tax exposure, including the Roth 401(k), once companies actually start to allow it. Money in a Roth plan—either a Roth 401(k) or a Roth IRA—grows tax-free.

Roth 401(k) Retirement Plans more popular

Roth 401(k)s came into existence in 2006 and are slowly becoming more common. It is now offered in about 40% of Vanguard Group’s workplace retirement plans and almost half of the large employer plans offered by Fidelity Investments. Total contribution limits remain the same as at companies with only a regular 401(k)—$16,500 per participant this year, with an additional $5,500 “catch-up” for those 50 or older—but the money can be divided at will between regular and Roth 401(k)s.

Two other reasons to stay in a company’s 401(k) Retirement system versus shifting to an outside IRA: … for the rest of this article, go to Roth 401(k)s Get a Booster at Wall Street Journal.

For decades, high fees have quietly but steadily eaten away at the value of 401(k) retirement plans. Now employees are making headway in legal battles to force employers to lower costs.

Employees of Edison International won a big victory this month when a federal judge ruled that the company’s 401(k) fees were excessive and said employees were entitled to recover an as-yet-undetermined amount of overcharges.

U.S. District Judge Stephen Wilson said in an 82-page decision that Rosemead-based Edison did “substantial” harm by failing to negotiate lower prices with the outside firm running the 401(k). A large company such as Edison easily could have gotten a better deal on three of the mutual funds in its plan, but simply didn’t try, the judge said.

The Edison case is one of more than two dozen lawsuits filed against U.S. employers in recent years. The suits allege that companies allowed 401(k) providers to stuff the plans with high-cost investments in exchange for reducing the administrative costs paid by the employers themselves.
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The most prominent case accuses Wal-Mart Stores Inc., which is famous for squeezing suppliers for lower prices, with failing to negotiate the lowest fees for its 401(k) participants. The plaintiffs got a boost late last year when an appellate court ruled that the closely watched case could proceed.

The Edison ruling could influence the outcome of other suits and turn up the pressure on employers to pay closer attention to 401(k) fees, experts say.

“It’s a big development,” said Fred Reish, a partner at Reish & Reicher in Los Angeles who is not involved in the case. “It will encourage plaintiffs’ attorneys to continue to litigate and will encourage [employers] to look for lower-cost share classes for their plans, which will ultimately benefit the participants.”

Retired Edison employee Fred Suhadolc, a lead plaintiff on the suit, said he and other employees were dismayed at the high fees in their plan because they thought the company would do its best to keep them low. Unfamiliar with the stock market and 401(k)s, Suhadolc said he never understood the fees and still has no idea how much he overpaid.

“It’s frustrating and disappointing that you expect to be treated honestly and fairly, and when you find out that you’re not you almost feel cheated,” said Suhadolc, a former maintenance mechanic at an Edison subsidiary in Illinois.

Edison declined to comment.

It’s difficult to determine the financial toll of excessive 401(k) fees, but some experts say they collectively drain tens of millions of dollars a year from unsuspecting investors.

At Edison, for example, an average employee who invested exclusively in the three funds would have paid more than $300 a year in unnecessary fees, estimated Jerome Schlichter, the St. Louis attorney who represented Edison employees. That does not include foregone investment gains on that money.

For the rest of this story go to Employee allegations of excessive 401(k) fees gain ground.

Forbes magazine reports on a collosal failure at Wal-Mart to put their employees first in the administration of their 401(k) plan. Who is the big winner? Merrill Lynch, who else? This is how Wall Street works. I hope this is a wake up call to many Americans who are being fleeced by the likes of Merrill Lynch in their retirement plans. I encourage you to take a good look at your plan, find out how much is being paid from your assets compared to what you could get it for – if employee benefit is on the top of the list rather than broker benefit.

For the whole Forbes story go to Wal-Mart 401(k) Pays Retail