Monitor Redemption Fees & Transfer Restrictions

Monitor Redemption Fees & Transfer Restrictions

Fees & Restrictions

If retirement plan participants buy and sell shares of a fund during a fund’s holding period, some investment management companies will charge a fee to the participant’s account. These redemption fees are used to discourage market timing and abusive trading.

Who Determines Redemption Fees?

Each investment management company develops its own redemption fee policy and/or transfer restriction, including the length of the minimum holding period. The investment manager charges the redemption fees and payment is taken out of the participant’s account. Consult each fund’s prospectus  for a complete explanation of any fees that might be imposed.

Why Have Redemption Fees & Transfer Restrictions Become Necessary?

Some investors attempt to profit from various short-term or frequent trading strategies commonly known as market timing. Excessive purchases and redemptions disrupt underlying portfolio management, hurt underlying fund performance and drive underlying fund expenses higher. These costs are borne by all investors, including long-term investors who do not generate these costs. Redemption fees and transfer restrictions are an attempt to discourage these disruptive trading practices.

How Can I Monitor Fees & Restrictions?

To monitor redemption fees and transfer restrictions that apply to your retirement plan’s investment options, .


This information is provided for overview or general educational purposes only. This is not be be considered or intended to be legal or tax advice. Changes in the tax law may affect the information provided. For personalized assistance, including any specific state law requirements, consult a legal or tax advisor.

< < Go Back