As companies await the effective date of the U.S. Department of Labor's new 401(k) fee disclosure rules, they need to give some serious thought to the best way to communicate with employees about these fees. We have covered these fee disclosures extensively in the past, but now it's time to focus on telling the story behind those fees.

Perhaps the most important thing to keep in mind is that employees are likely to be surprised that these fees exist at all and that employees are paying them. A survey conducted by the Association of American Retired Persons (AARP) last year found that 71% of the 803 respondents said that they do not pay any fees for their employer-provided 401(k) plans, with only 23% saying that they do pay fees.

To deal with any issues that arise during and after required fee disclosure, companies need to develop a plan now to communicate effectively about these issues. Here is the timeline for disclosures:

July 1: Deadline for plan sponsors to receive fee disclosure data from 401(k) plan investment providers.

August 30: All 401(k) plan sponsors must disclose plan facts and investment fees.

November 14: All 401(k) plan sponsors issue their first quarterly fee disclosure showing the fees deducted from individual participant accounts for the third quarter.

"While these may seem like just another set of legal notices, employee engagement, the perception of your 401(k) plan and, most importantly, employees' long-term financial security are at stake," says Jennifer Benz, founder and chief strategist of Benz Communications, an HR and benefits communication strategy firm in San Francisco. "At a time when few people are saving enough for their futures, we can't let 401(k) fees be a confusing factor that discourages participation in their plan."

Benz suggests that companies develop a communication strategy for these disclosures in order to refine messages the company wants to emphasize before the initial disclosure announcement and then to prepare employees for the first wave of quarterly disclosures. She offers four ways to effectively communicate about these fees.

1. Put plan fees in context. An employer offering a 401(k) plan that has worked hard to keep fees as low as possible should not be shy about saying that. The key message is that negotiation and the plan's economies of scale probably mean that these fees are lower than an individual employee would pay to invest in a regular brokerage account. That represents a good deal for employees even if the company is not covering all of those fees. This is also the time to emphasize investment advice and other retirement planning tools the company and the plan provide, as well as any tools that can show how fees fit with typical investment returns, suggests Benz.

2. Remind employees what is good about 401(k) plans. If a company has not communicated about the tax benefits of 401(k) contributions and investments and any matching contributions that are available, now is the time to re-emphasize those elements of the 401(k) plan. "Focus on the whole story: match, tax deferral and retirement support, along with fees," says Benz. "Don't dilute the power of all you're providing, even if you aren't picking up the full tab for fees."

3. Be consistent. Benz notes that, although the Department of Labor has developed annual and quarterly notice models that contain valuable information, the format of these notices is somewhat dense and technical. She urges companies to translate this information into language and examples that are easy to understand and relate to. "Align terms with those you're using in your existing savings communications," she says. "To increase fluency, understanding and acceptance, embed definitions of administrative and investment fees into all your savings communications."

4. Start now. Procrastination is not a good communication strategy. "The worst thing you can do is let your employees discover the 401(k) fees from their usually unopened statements," says Benz. It is easy to assume that participants will not read the statements. However, "why risk a negative – disengaging – reaction?" she asks.

Related Articles:

Employers' Take on Retirement Plan Fee Disclosures and other Key Issues

Rethinking 401(k) Fee Arrangements

Comparing 401(k) Fees in the Age of Disclosure