What are the transaction costs within a plans investment options?
Transaction costs are incurred when an investment manager buys and sells securities. These costs are also called trading costs or implicit costs. The Securities and Exchange Commission (SEC) has identified four major types of transaction costs: commissions, spread costs, market impact costs, and opportunity costs. The SEC, academic researchers, and firms specializing in Transaction Cost Analysis (TCA) have estimated that transaction costs can be as large as, or larger than a fund’s expense ratio. In spite of their magnitude, these fees (other than commissions, which are disclosed in a fund’s Statement of Additional Information) are undisclosed and there is currently no consensus in the investment management and academic communities about how to effectively calculate and disclose transaction costs to investors. However, this lack of disclosure does not relieve plan fiduciaries from their ERISA obligation to ensure that all plan fees are reasonable. Under ERISA, plan fiduciaries are requ
