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COLLECTED WISDOM™ on 401k Plan Fees and ExpensesThe issue of fees and expenses related to the operation of a 401k plan continues to draw great attention. We have pulled together a number of items that we think will give you a good feel for the issues you need to consider. This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic. If you find a broken link or an items that you feel is outdate, irrelevant or no longer appropriate, please let us know.
A Primer on Plan FeesAbstract: One of the many duties plan fiduciaries have is to understand the fees and expenses charged to their employer-sponsored defined contribution plan. This is a guide to the different plan fee pricing models and the steps to take to ensure fees are reasonable. Source: 401khelpcenter.com
Fee Disparity Linked to Size of Defined Contribution PlansAbstract: Sponsors of small and midsize plans may be paying too much in fees, particularly if they're being charged a percentage of total plan assets, according to industry experts. The disparity can be attributed to both the plan sponsors themselves and the recordkeepers. Sponsors of small and midsize plans often don't have the time or knowledge to benchmark fees. Meanwhile, recordkeepers have pursued their own self-interest, pushing smaller plans into asset-based fee models, which may hurt participants long term, industry observers say. Source: Pionline.com, April 2019
Tussey v. ABB Closes With $55 Million Settlement; Complex Case Changed Views of Fees, Fiduciary DutyAbstract: Tussey v. ABB, after winding through earlier settlement awards to the plaintiffs, two appellate hearings in the 8th Circuit, and double rejections by the U.S. Supreme Court, ultimately will be remembered both as a case about plan sponsors' fiduciary duties and one that defined how to quantify participant losses from related breaches. As a result, the retirement plan industry has moved in a unified way to press for reductions in service provider fees, opt for lower-cost share classes, and insist upon greater transparency for recordkeeping and asset management costs. Source: Blr.com, April 2019
Fee Compression: Five Ways Providers Monetize RecordkeepingAbstract: While some of the compression can be attributed to vendor consolidation and scale, why would billion-dollar financial services organizations continue to invest in recordkeeping capabilities where profits have traditionally been so thin? The answer is: they believe there is an opportunity to generate additional revenue beyond the recordkeeping fees for servicing retirement plans. Generally, there are five areas where recordkeeping vendors have tried to monetize their relationship with retirement plans. Source: Multnomahgroup.com, April 2019
What Are Average 401k Fund Fees?Abstract: This article breaks down what 401k expense ratios are and why they matter. Then it will walk you through the latest data on average fund fees, and end with insider tips sourced from industry experts on how you can lower fund fees for your plan. Source: Forusall.com, March 2019
404(a)(5) Participant Fee Disclosures: Rules & RequirementsAbstract: What the heck is a 404(a)(5) participant fee disclosure? And what are the requirements around sending them? This article demystifies this important document, breaking down what it is, why it's important, and everything else you need to know about sending it. Source: Forusall.com, March 2019
Six Steps to Lower 401k FeesAbstract: 401k plans are expensive. Plan fees, taken as a percentage of the assets, can add up to a huge chunk of change that can take years off of your or your employees' retirements. A two percent fee doesn't sound like daylight robbery, but over 35 years, that little fee can consume up to half of your retirement earnings. All of this is to say that minimizing 401k fees is crucial for retirement success. Of course, easier said than done. Source: Forusall.com, March 2019
Sponsors of DC Plans Still Sharply Focused on FeesAbstract: For the third year in a row, respondents to the annual Callan Institute "Defined Contribution (DC) Trends Survey" specified reviewing their plan fees as a key area of focus and as the best way to improve their fiduciary position as plan sponsors. Asked in the fall of 2018, 106 defined contribution (DC) plan sponsors, both Callan clients and other organizations, said that for 2019, assessing fees was more important than any other activity they undertook in managing their plans. Source: Hrdailyadvisor.blr.com, February 2019
401k Plan Sponsors Laser-Focused on FeesAbstract: Fees charged in defined-contribution plans rank as plan sponsors' top area of focus in 2019, according to a new report, as employers continue to worry that high fees for functions like administration and investment management could expose them to legal liability. Source: Investmentnews.com (registration may be required), January 2019
401k Fiduciary Lawsuit Highlights Fee BenchmarkingAbstract: Many 401k fiduciary lawsuits have focused on fees including, their reasonableness, their necessity, and whether the fees are being assessed for funds and services add value and help participants achieve their retirement goals. How often do you check up on your retirement plan fees? Investment committees need to be aware of their fiduciary duties and remain vigilant in carrying them out. Source: 401ktv.com, December 2018
2018 Small Business 401k Fee Study - What's Too High?Abstract: Employers have a fiduciary responsibility to ensure the fees paid by their 401k plan participants are "reasonable" and not subject to unnecessarily excessive fees. To do that job, employers must benchmark their 401k fees - basically, compare them to industry averages and/or fee charged by competing 401k providers. Sounds straightforward, but this information is hard to find and often harder to compare on an apples-to apples basis. Source: Employeefiduciary.com, November 2018
Making Sure 401k & 403b Fees are "Necessary and Reasonable" - Part OneAbstract: As a plan sponsor, you are required to understand all of the fees that are associated your organization's retirement plan benefit program. This is a challenge because plan fee structures are often opaque, complicated, and downright misleading. The most effective way to meet your fiduciary requirement is a Request for Proposals process, typically run every three-to-five years. Why? The 401k and 403b markets are extremely competitive. They are constantly evolving and changing. Source: Fiduciaryplangovernance.com, November 2018
ERISA: Thou Shall Not Pay Excessive FeesAbstract: With increased government scrutiny, ERISA lawsuits at an all-time high, and the plaintiff's bar not only increasing in number but in sophistication, 403b plan fiduciaries will continue to face high exposure if they fail to prudently select and then continue to monitor the investments options of their plans and plan fees. Litigation is not limited to large plans, as plaintiffs and the DOL have found that smaller plans are “low hanging fruit” in terms of finding ERISA violations. Source: Ckrlaw.com, November 2018
How Do Fees Affect Plans' Ability to Beat Their Benchmarks?Abstract: Plans compare their returns by asset class to selected benchmarks that reflect their investment goals for the asset class. Plans pay fees to external asset managers with the expectation that the managers will exceed these benchmarks. As such, this paper focuses on the benchmarks to assess the role of fees. The question is whether higher fees help or hinder the ability for a plan to outperform its chosen benchmarks. Source: Bc.edu, October 2018
Understanding Revenue Sharing and the Flow of Money in Retirement PlansAbstract: it's critical for employers to understand the various components of their retirement plans' fees, particularly indirect fees like revenue sharing arrangements. This 4-page article describes common ways in which money flows through retirement plans. Each provider may operate differently, so be sure to check with your provider for information specific to your plan. Source: Grinkmeyerleonard.com, September 2018
Why Is Recordkeeping Pricing Different for 403bs?Abstract: The price of recordkeeping services is not uniform; it can vary depending on type of retirement plan. This article discusses why pricing for 403bs is different than that for 401ks including four factors that impact 403b pricing. Source: Ntsa-net.org, August 2018
401k Plans May Soon Experience Higher Fees for Ancillary ServicesAbstract: 401k plan fee reductions have been occurring in recent years as retirement plan vendors made a land grab for their share of the DC plan market. To date, those 401k plan fee reductions have applied mostly to costs for core services, such as administration and recordkeeping. If they haven't already, sponsors may soon experience higher 401k and 403b plan fees for "extras" such as plan distributions or loans, that only occasionally impact a portion of participants. Source: 401ktv.com, August 2018
A Guide to Retirement Plan Fees & ExpensesAbstract: This paper discusses retirement plan fees and expenses with the intention of assisting retirement plan sponsors in achieving a greater understanding of their plan fees. For the purposes of this paper, it will categorize the fees and then detail the specific functions typically related to each expense. Source: Multnomahgroup.com, July 2018
What are the "Reasonable" Expenses That Can Be Paid Out From Plan Assets?Abstract: Under ERISA, retirement plan sponsors have a fiduciary duty that requires them to act solely in the interest of plan participants and beneficiaries. Plan sponsors are also limited to using plan assets for the reasonable expenses of administering the plan. Using plan assets for other plan expenses could be a breach of the sponsor's fiduciary duty and lead to potential fines and costly litigation. Source: Bsllp.com, July 2018
The Differences Between 403b and 401k PricingAbstract: 403b plans are fundamentally different than 401k plans. Many of these differences result in a greater amount of work required to administer 403b plans and more work equals more money. This article looks at a few of the major 403b plan price drivers that do not exist in 401k plans. Source: Cammackretirement.com, June 2018
Three Common Fee Blunders and How to Avoid ThemAbstract: At the source of every headline grabbing fiduciary breach trial is a fee mistake. How can learning more about these everyday fee mistakes help 401k plan sponsors avoid them and the fiduciary liability they bring? Here are three of the most common plan sponsor fee mistakes and what to do to avoid them. Source: Fiduciarynews.com, June 2018
Paying "Reasonable" 403b Plan ExpensesAbstract: One of the perennial issues facing the sponsors, participants and fiduciaries of 403b plans, as well as the consultants servicing or advising such individuals or plans, is plan expenses. Section 403b plans, particularly those that are covered ERISA, must carefully watch what they spend with their limited resources. Source: Ntsa-net.org, May 2018
Why Plan Sponsors Should Regularly Benchmark Retirement PlanAbstract: A vital plan fiduciary responsibility is regular benchmarking of plan performance and fees against industry averages. This kind of cross-referencing is the responsibility of plan sponsors and can come with significant risks and opportunities. This article looks at the factors that make sound benchmarking practices so crucial. Source: Planpilot.com, May 2018
Many Small-Business Leaders Express Limited Knowledge of Retirement Plan FeesAbstract: Many small-business owners and managers don't have a good feel for how much they or their employees pay in fees to their retirement plans, according to a survey conducted by The Pew Charitable Trusts. The survey results indicate that many of these business leaders -- like many workers -- have limited knowledge about plan fees, a reality that can be detrimental to workers' long-term finances. Whether savers pay high or low fees on their investments can make a large difference over time in the growth of retirement savings. Source: Pewtrusts.org, May 2018
Advisors, Sponsors Cutting 401k FeesAbstract: Plan sponsors, still feeling the pressure of the Department of Labor's six-year-old fee disclosure rules and the threat of fee-related litigation, are continuing to place 401k fees under the microscope. A number of other factors continue to drive down 401k fees, including a competitive marketplace, growing client awareness about fees, sharper value propositions from advisors, an increase in the quality and volume of reporting of plan outcomes, and an industry shift toward fee-based plans and low-cost investments. Source: Fa-mag.com, May 2018
Understanding and Evaluating Retirement Plan FeesAbstract: With retirement plan fees serving as the centerpiece of ERISA fiduciary breach lawsuits, understanding the dynamics of retirement plan fees is critical for plan sponsors and fiduciaries. Regardless of plan size or defined contribution plan type, fees have become a primary focus and concern of plan fiduciaries. This article explores the three types of fees that retirement plan fiduciaries need to understand and evaluate. Source: Cammackretirement.com, March 2018
401k Service Providers Owe No Fiduciary Duty With Respect to Negotiating Their Fee CompensationAbstract: Following the findings expressed in three other Circuits, the United States Court of Appeals for the Ninth Circuit recently held that plan administrators are not ERISA fiduciaries when negotiating their own compensation with prospective customers. Instead, because the employer/plan sponsor has the express duty under ERISA to defray reasonable expenses of administering a 401k plan, any claims that fully disclosed fee arrangements are unreasonable "lie against the employer, not the service provider." Source: Masudafunai.com, March 2018
Making Sure 401k & 403b Fees are Necessary and Reasonable - Part ThreeAbstract: As a plan sponsor, you are required to understand all of the fees that are associated your organization's retirement plan benefit program. This article wraps up the three part series on the subject. Source: Fiduciaryplangovernance.com, February 2018
Making Sure 401k & 403b Fees are Necessary and Reasonable - Part TwoAbstract: As a plan sponsor, you are required to understand all of the fees that are associated your organization's retirement plan benefit program. This article continues the series on the subject. Source: Fiduciaryplangovernance.com, February 2018
Making Sure 401k & 403b Fees Are "Necessary" and "Reasonable" - Part OneAbstract: As a plan sponsor, you are required to understand all of the fees that are associated your organization's retirement plan benefit program. This is a challenge because plan fee structures are often opaque, complicated (needlessly so) and, sometimes, downright misleading. Source: Fiduciaryplangovernance.com, February 2018
Lawsuits Push 401k Plan Sponsors to Cut FeesAbstract: Employers are moving to reduce their 401k plan costs in greater numbers, largely in an attempt to avoid the fate of peers who've been sued for allegedly excessive fees in their defined-contribution plans, new research suggests. Source: Investmentnews.com (registration may be required), January 2018
ERISA's Reasonable Fee RequirementAbstract: Plan fiduciaries must review service provider fees annually against reliable indicators as part of proper plan governance. The efficacy of any such review depends upon the ability to break out fees for each service and to utilize acceptable benchmarks, rather than self-serving benchmarks supporting excessive fee arrangements. Source: Cpajournal.com, September 2017
Webinar Replay: NEPC 12th Annual DC Plan and Fee SurveyAbstract: NEPC's Ross Bremen, CFA, Partner, and Kevin McCullough, CFA, Analyst, hosted this review of NEPC's 12th Annual DC Plan and Fee Survey. NEPC conducted the Survey to capture data and trends around plan design, and to help plan fiduciaries better understand and measure the investment and administrative costs of their plans. Source: Nepc.com, September 2017
Seven-Year Streak of Falling Corporate DC Plan Fees EndsAbstract: Investment consulting firm NEPC's annual defined contribution plan and fee survey reported that recordkeeping, trust and custody fees remained flat over the past year, the first time it hasn't declined since 2010. Source: Ai-cio.com, September 2017
Participants' Best Interests May Not Be Served by the "Race to the Bottom"Abstract: While lawsuits and investigations have served a purpose in lowering plan fees, a side effect is that many plan sponsors, in their concern to meet compliance standards, have made a search for the lowest fees such a priority that they have unwittingly overlooked the best way to serve plan participants. Source: Alliantwealth.com, September 2017
Expense Ratios for DC Plans Stall Out at a New LowAbstract: For years, fees on investments in workplace retirement savings plans have been falling. Now, at least for the moment, they're stalling. But there's room for improvement in plan options, and look out for new fees creeping in. Source: Investmentnews.com (registration may be required), August 2017
Fiduciary Considerations for Plan Sponsors - Evaluating Plan FeesAbstract: A common theme running through class-action lawsuits filed against plan fiduciaries is the violation caused by not properly understanding and addressing the fees of their 401k plan. The article describes three methods for determining if plan fees are reasonable. Source: Morganstanleyfa.com, August 2017
Pro-Rata Participant Fees and Fee Transparency: A Recordkeeper's ConundrumAbstract: As 401k fees are being challenged in excessive fee lawsuits, and participants are, rightfully, checking their accounts and verifying their fees, it is prudent to have fees that are fair and transparent. Source: Rpgconsultants.com, August 2017
Defining Expense AccountsAbstract: What is a Plan Expense Account (also known as an ERISA Account, ERISA Budgets Account, or Revenue-Sharing Account)? This 5-page white paper deals with what they are, who are they for, how they work, why they exist, and how they are handled. Source: Multnomahgroup.com, July 2017
Retirement Plan Fees: Top Three Questions AnsweredAbstract: With retirement plan fees serving as the centerpiece of fiduciary breach lawsuits, it is no wonder that this is the leading topic of interest with retirement plan fiduciaries. Source: Cammackretirement.com, July 2017
Investment Manager and Recordkeeper Changes Driven by FeesAbstract: Plan sponsors' desire to reduce plan costs is substantially impacting their approach to investment menu design and their relationships with defined contribution plan investment managers, according to findings from Retirement Planscape, an annual Cogent Reports study by Market Strategies International. Source: Plansponsor.com, July 2017
Making Sure 401k and 403b Fees Are "Necessary" and "Reasonable" - Part TwoAbstract: You are also required to ensure the services for which the plan is paying are necessary and reasonable. The most effective way to meet this fiduciary requirement is a Request for Proposals (RFP) process. This is part two in a series on making sure 401k and 403b fees are "necessary" and "reasonable." Source: Fiduciaryplangovernance.com, July 2017
Making Sure 401k & 403(b) Fees Are "Necessary" and "Reasonable" - Part OneAbstract: A plan sponsor is required to understand all the fees that are associated your organization's retirement plan benefit program. This is a challenge because plan fee structures are often opaque, complicated, and sometimes, downright misleading. You are also required to ensure the services for which the plan is paying are necessary and reasonable. The most effective way to meet this fiduciary requirement is a Request for Proposals (RFP) process. Source: Fiduciaryplangovernance.com, June 2017
Mutual Fund Trading Costs: The Most Important Fee You've Never Heard Of?Abstract: What if I told you that there is a fee present in mutual funds that is not included in the fund's published expense ratios and is often not publicly disclosed by the fund companies, since the SEC does not require its disclosure? You might laugh, but it is true. Source: Cammackretirement.com, June 2017
The Economics of Providing 401k Plans: Services, Fees, and Expenses, 2016Abstract: The cost of investing in equity, hybrid, and bond mutual funds through 401k plans fell again in 2016, according to a research study that the Investment Company Institute just released. The 32-page study also shows that participants who invest in mutual funds in their 401k plans tend to hold lower-cost funds. Source: Ici.org, June 2017
A Guide to 401k Fees and Fee-Related Liabilities for Retirement PlansAbstract: The topic of 401k fees has dominated the headlines for the better part of this decade. Running a company 401k plan is an arduous task. Navigating fiduciary responsibilities is also a potential minefield of liability as ambitious law firms aggressively attempt to exploit the subjective regulatory frameworks of the IRS and the DOL. Nowhere within a 401k plan is there more potential liability than with regard to the subject of fees. Source: Forextv.com, May 2017
Four Questions to Guide Your Fee Evaluation ProcessAbstract: As a plan fiduciary, you have a responsibility to ensure your service providers' compensation is reasonable relative to the services provided. A fiduciary process for assessing fees can help meet your obligation to provide a plan that operates in the best interest of your employees. Your plan provider or consultant can help you navigate this process by helping you answer four key questions. Source: Tiaa.org, March 2017
Fiduciary Fee ReasonablenessAbstract: Fee reasonableness is a fundamental and widely discussed fiduciary topic. Despite the importance of the topic, the DOL hasn't given much insight or guidance as to what is considered a reasonable fee. As a result, much of the interpretation of what is and is not reasonable has come from the courts. As a fiduciary, it is important to turn to litigation for guidance, acknowledge how excessive fee allegations have evolved, and most importantly, to appropriately manage this risk in the future. Source: Manning-Napier.com, March 2017
12b-1 Fees: It Is Time to Bid Them FarewellAbstract: Given the 12b-1 fee's implicit conflicts -- and their declining relevance -- arguably it's time to create a more appropriate pricing structure for the realities of today's investment marketplace. Source: Kitces.com, March 2017
401k Fees -- Frequently Asked Questions by Plan FiduciariesAbstract: If you're a 401k fiduciary, you don't want to be in the dark about your plan fees. The potential consequences for paying excessive 401k fees are too great. This FAQ will answer some of the most common 401k fee questions. Source: Employeefiduciary.com, March 2017
Increased Litigation Leads Plan Sponsors to Take Defensive Stance in Monitoring and Evaluating FeesAbstract: When monitoring investment and recordkeeping fees, a plan sponsor would be smart to remember the recurring themes of recent 401k participant fee lawsuits. This article reviews the themes that have frequently arisen in recent fee lawsuits. Source: Plansponsor.com, February 2017
For DC Plans, Lowest Fees Aren't a PanaceaAbstract: There's no question fees are a hot topic for defined contribution plan sponsors. But one risk of focusing too tightly on fees is creating a distortion that addresses cost while possibly overlooking other retirement-saving factors. With so many equal or greater concerns, it's important for plan sponsors to keep a broad perspective and maintain a comprehensive approach to their fiduciary duties. Source: Abglobal.com, January 2017
Understanding Your Retirement Plan Fee MethodologyAbstract: Understanding your retirement plan's fees is not only a good practice, it's a fiduciary requirement. The principal reason fees have been thrust into the limelight is that plan participants often bear most, if not all the cost of running the plan. This article does not discuss how to determine if fees are reasonable, but instead explores a relatively new debate over which fee assessment methodology is fairer. Source: Strategicbenefitservices.com, January 2017
Do Your Fiduciaries Negotiate for Lower 401k Plan Fees?Abstract: Fiduciaries of very large plans who wouldn't think of not haggling with a dealer over the price of a new car or a hotly negotiating a business deal have sometimes neglected to leverage their plan's size to negotiate lower 401k fees. The result is a sharply increased risk of being sued. Source: Cohenbuckmann.com, January 2017 401khelpcenter.com, LLC is not the author of the material referenced in this digest unless specifically noted. The material referenced was created, published, maintained, or otherwise posted by institutions or organizations independent of 401khelpcenter.com, LLC. 401khelpcenter.com, LLC does not endorse, approve, certify, or control this material and does not guarantee or assume responsibility for the accuracy, completeness, efficacy, or timeliness of the material. Use of any information obtained from this material is voluntary, and reliance on it should only be undertaken after an independent review of its accuracy, completeness, efficacy, and timeliness. Reference to any specific commercial product, process, or service by trade name, trademark, service mark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by 401khelpcenter.com, LLC. | |||||||
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