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COLLECTED WISDOM™ on 401k Plan Fees and Expenses

The 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.

    

You may also find useful information also under the DOL's 408(b) Fee Disclosure Regulations page.

DC Fee Management -- Mitigating Fiduciary Risk and Maximizing Plan Performance

Summary: Effective fee management is a critical component in maximizing retirement readiness and minimizing fiduciary risk. DC plan fees are the target of intense scrutiny from legislators, regulators, and litigators, and lawsuits continue to grab headlines. This paper on DC Fee Management will help plan sponsors to ensure DC plan fees are competitive and appropriately allocated, and assist committee members in satisfying their fiduciary requirements.

Source: Mercer.com , November 2013

Life After Fee Disclosure

Summary: While participants usually don't have any choice when it comes to which plan they can join, they can use fee information to pressure sponsors into negotiating for a better deal. And plan sponsors can use the data to go out to other vender's with an RFI and RFP asking for competitive bids. Not only does this allow plan sponsors to provide participants with a better plan, but should the DOL's come calling, the plan has proof that it's fulfilling its fee disclosure duty and demonstrated prudence under the new regs.

Source: Benefitspro.com, June 2013

Paying Employee Benefit Plan Expenses

Summary: This article describes the types of expenses that may and may not be paid from the assets of an employee benefit plan. It also explains the requirements that must be met before expenses can be paid from plan assets, the methods for allocating expenses between plans and among plan participants and the consequences of paying improper expenses from plan assets.

Source: Groom.com , June 2013

PSCA's Fee Disclosure Snapshot Survey Results

Summary: PSCA's snapshot survey on the impact of fee disclosure regulations on participants was conducted in October 2012, and received 176 responses from defined contribution plan sponsors. The fee disclosure information that participants received seems to have had little impact their behavior.

Source: 5500audit.com , April 2013

Infographic on 401k Plan Fees

Summary: For most the world of 401k investing can be confusing. With so many terms and numbers to remember, learning all the terminology can be just like learning a new language. And with the recent release of 401k fee information, 401k participants are expected to decipher a handful of new terms. This Infographic will help you better understand the nuts and bolts of 401k plan fees.

Source: 401khelpcenter.com, November 2012

Proper Advisor Benchmarking Values Facts Over Opinions

Summary: Plan sponsors that have hired an advisor without a documented process to support the hire are vulnerable to claims of fiduciary breach of loyalty and prudence as well as potential claims of self-dealing and conflicts of interest. Although not anticipated, ERISA 408(b)(2) and 404(a)(5) may become the death knell for lifetime members of the "good old boy network" that have relied on their relationships -- instead of the knowledge, experience and skill -- to secure retirement plan engagements.

Source: Fiduciary Risk Assessment , October 2012

Proposal Games: Why You May Not Know What Your 401k Plan Will Cost

Summary: When a plan sponsor goes to evaluate potential 401k service providers, will they be able to determine and understand how much their plan will cost? Author says, "Unfortunately, this can be quite difficult, as many providers have tried to gain a competitive edge by playing 'proposal games.'"

Source: 401khelpcenter.com, October 2012

Slicing and Dicing Retirement Plan Fees: Allocation Considerations for Plan Sponsors

Summary: In the wake of new fee disclosure rules, plan sponsors have increased their focus on how recordkeeping fees are allocated across participant populations. Beyond ERISA's general fiduciary requirements, there is limited legal guidance directly addressing how to allocate fees. This white paper addresses the fiduciary standards applicable to such allocation decisions.

Source: Vanguard , October 2012

Checklist for Retirement Plan Sponsors in Reviewing Fee Disclosures From Service Providers

Summary: While the DOL has not yet issued meaningful guidance as to what specific actions are required by responsible plan fiduciaries with respect to the service provider fee disclosure regulations that took effect on July 1, 2012, This checklist is a practical guide for responsible plan fiduciaries to address their initial obligation when they receive the relevant disclosures from service providers.

Source: Patterson Belknap Webb & Tyler LLP , September 2012

Inside the Structure of Defined Contribution/401k Plan Fees

Summary: This study was designed to analyze and identify the drivers of defined contribution plan fees. It addresses: 1) The mechanics of defined contribution plan fee structures; 2) Components of plan fees; and 3) Primary and secondary factors that impact fees.

Source: Deloitte , September 2012

See How Your Company's 401k Plan Stacks Up in Three Simple Steps

Summary: If you're one of the many business owners with a 401k plan, you probably just received an important 401k plan fee disclosure document from your plan administrator that reveals, in greater detail than ever before, just how much you and your employees are paying in fees. And while that document provides a lot of answers, it may also beg a few important questions.

Source: Forbes, July 2012

The 408(b)(2) Fiduciary Conundrums: Defining, Implementing, and Monitoring Your 401k Plan's Value Proposition

Summary: The new 408(b)(2) fee regulations require 401k fiduciaries to make sure that the vendors' fees are "reasonable." Unfortunately, the term "reasonable" is not defined. So, what does it mean for a fee to be reasonable?

Source: Investmenthorizons.com , June 2012

The Latest in Revenue Sharing and Excessive Fees

Summary: As a Plan Fiduciary, you cannot rely on a non-fiduciary service provider with a conflict in interest to accept responsibility for their recommendations. In a recent court decision (Tussey vs. ABB, Inc., U.S. District Court, Western District of Missouri Central Division), a Company sponsoring a retirement plan (ABB, Inc.) along with the head of the Benefits committee, named individually, and the entire committee, were ordered to pay a judgment of $35.2 million.

Source: Asset Strategy Consultants, April 2012

Finally the Final...408(b)(2) Regulation

Summary: The Department of Labor has issued the long-anticipated final service provider fee disclosure regulation. In finalizing the regulation, the DOL extended the compliance deadline from April 1, 2012, to July 1, 2012. In this article, Fred Reish and Bruce Ashton describe what the amendment says and what they think are the most important changes; in a subsequent piece, they will explain the impact on various service providers.

Source: Drinker Biddle & Reath LLP , February 2012.

Fee Disclosure Overview for Plan Sponsors and Their Advisors

Summary: This year the Department of Labor is implementing two new regulations regarding fees and fee transparency for retirement plans. This is a summary of the provisions of the new regulations and how plan sponsors and participants will be affected.

Source: Sentinel Group , January 2012.

An Effective Strategy for Plan Sponsors in a New Regulatory Age

Summary: Roland|Criss publishes part two of their three-part white paper series on the new fee disclosure rules and their impact on plan sponsors. In this paper, they reveal the strategies plan sponsors can adopt in order to be compliant with the new fee disclosure regulations, while maximizing stewardship.

Source: Roland|Criss , December 2011.

Sample Certification of Reasonableness of Plan Services

Summary: This is a sample certification that illustrates the type of documentation that plan sponsors need to establish compliance with 408(b)(2) requirements.

Source: Dalbar , December 2011.

A Different Perspective on the New DOL Fee Disclosure Regulations

Summary: In order to provide perspective on how the new DOL fee disclosure rules will affect plan sponsors in 2012 and beyond, Roland|Criss has published this white paper (part one of a three-part series) that aims to clarify, equip, and empower plan administrators as they navigate through the sea change in their fiduciary roles.

Source: Roland|Criss , November 2011.

New Rules Will Have Fiduciary Impact

Summary: Next year, new federal rules requiring fee disclosures from 401k plan providers make it imperative for companies sponsoring plans to ensure that fees are reasonable. Employers that start preparing now for the new disclosure regime will be ahead of the game.

Source: HREonline.com, November 2011.

Fiduciary-Level Disclosures for ERISA Retirement Plans

Summary: Provides insight into the DOL's new fiduciary-level disclosure regulation, also the historical context and practical application of the regulation. In the paper, ERISA plan fiduciaries can find information regarding: An overview of the interim final regulation; types of fees and expenses included in the disclosures; timing of the required disclosures; and, a fee oversight checklist.

Source: MetLife , October 2011.

Defined Contribution 401k Fee Study

Summary: The Investment Company Institute engaged Deloitte to conduct a survey of DC plan sponsors to shed light on how fee structures work within the DC plan market. Specifically, the research addressed: the mechanics of plan fee structures; components of plan fees; and primary and secondary factors that impact fees ("fee drivers"). This is the 33 page report on the research.

Source: Investment Company Institute , July 2011.

Economics of Providing 401k Plans: Services, Fees, and Expenses

Summary: As part of an ongoing comprehensive research program, the Investment Company Institute conducts research to shed light on the services, fees, and expenses within 401k plans. Among ICI's findings reported here, the asset-weighted average expense ratio paid by 401k investors on their stock funds dropped 3 basis points to 0.71 percent. The asset-weighted average expense ratio paid on their bond funds remained unchanged at 0.56 percent.

Source: Investment Company Institute , July 2011.

Fee Disclosure Q&A: Answering Plan Sponsor Questions About New DOL Regulations

Summary: This set of questions and answers can help sponsors sort through issues related to the new DOL fee disclosure requirements. The topics covered are associated with two separate regulations-one designed to provide transparency in plan fees and expenses to participants, and the other to enhance what service providers disclose to retirement plan fiduciaries.

Source: Vanguard , June 2011.

Nowhere to Hide on Hidden 401k Fees

Summary: Under ERISA, CFOs and other retirement-plan fiduciaries are required to understand the fees and expenses charged and the services provided to the plan. With plan participants increasingly litigious, plan sponsors must take care that investment and administration expenses are "reasonable."

Source: CFO Magazine, June 2011.

VIDEO: Understanding 401k Fees

Summary: Fees associated with 401k plans are often unknown, hard to identify and difficult to review. This AARP video introduces some common 401k fees and explains how those fees may impact your retirement security.

Source: Youtube.com, June 2011.

Benchmarking of Retirement Plan Expenses

Summary: This paper is provided to help plan sponsors, service providers and professional advisors understand how expense data may be collected, collated and analyzed to help plan fiduciaries to make better decisions and reduce fiduciary risk. The data reflected in this analysis is not from a survey - what a service provider might charge a client, but instead actually identifies what a service provider has charged a client for the categories of services listed.

Source: PlanTools LLC , May 2011.

401k Participants' Awareness and Understanding of Fees

Summary: Successfully using a 401k plan to prepare for retirement requires knowledge of investment opportunities, types of plans and their mix of investments, knowledge of risk, and awareness of the costs associated with maintaining a plan. Despite the need for knowledge, seven in ten are not aware that they pay fees to their 401k plan provider to maintain their account. When told of these fees, six in ten are not aware of the amount they pay in fees to maintain their account.

Source: AARP , April 2011.

Understanding Retirement Plan Fees And Expenses

Summary: As the sponsor of a retirement plan, you are helping your employees achieve a secure financial future. Sponsoring a plan, however, also means that you, or someone you appoint, will be responsible for making important decisions about the plan's management. Your decisionmaking will include selecting plan investments or investment options and plan service providers. Many of your decisions will require you to understand and evaluate the costs to the plan. This booklet will help you better understand and evaluate your plan's fees and expenses.

Source: U.S. Department of Labor, March 2011.

Fiduciary Benchmarking of Retirement Plan Fees

Summary: This is a Q&A with Tom Kmak of Fiduciary Benchmarking and David Witz of Fiduciary Risk Assessment on the significant interest in benchmarking of fees because of the recent introduction of retirement plan fee disclosure regulations and the rise in litigation related to plan fees.

Source: Fiduciary Risk Assessment , March 2011.

401k Fee Disclosure for the "You Never Told Me" Employees

Summary: For employees who believe their 401k is free--bad news. These "you never told me" employees could blame their employer for allowing fees to be taken out of their accounts without telling them. Despite past omissions, starting now to be clear and forthright about fund and plan fees can promote trust and encourage employees to use their employer-provided plan to save for their retirement needs.

Source: Society for Human Resource Management, March 2011.

Final Participant Fee Disclosure Regulations

Summary: The Regulation is one part of a three-part set of rules intended to address fee disclosures and calls for two types of disclosures: (1) plan-related disclosures and (2) investment-related disclosures. This is a detailed review of the Regulation.

Source: Haynes and Boone LLP , February 2011.

Fee Disclosure: What 401k Plans Can No Longer Hide

Summary: Employers and employees will gain a much better understanding of the behind-the-scenes workings of 401k and other defined contribution plans as the result of two regulations issued by the Employee Benefits Security Administration. The regulations' aim is to help employers/plan sponsors and employees/participants make better decisions when it comes to selecting and managing investments held in participant-directed retirement plans.

Source: Society for Human Resource Management, February 2011.

Summary of Fee Disclosure in Participant-Directed Individual Account Plans

Summary: The Department of Labor published its final rule for disclosure of plan fees to participants on October 14, 2010. The rule was published in the Federal Register on October 20 and is effective 60 days after that date. The final rule generally follows the proposed rule, but significant additions, such as special rules for annuities, non registered investments, and employer securities; and numerous other adjustments, were made. This is a 10 page detail review.

Source: Profit Sharing/401k Council of America , October 2010.

DOL Issues Final 401k Fee and Expense Disclosure Rule

Summary: DOL announced the final rule to give the estimated 72 million participants covered by 401k-type retirement plans greater information regarding the fees and expenses associated with their plans in order to better manage their retirement savings.

Source: 401khelpcenter.com, October 2010.

Fact Sheet on Final DOL Fee and Expense Disclosure Rule

Summary: This is the DOL's fact sheet on their final 401k fee and expense disclosure rule which will apply to plans with a plan year beginning on or after November 1, 2011.

Source: U.S. Department of Labor, October 2010.

DOL Fee and Expense Disclosure Rule - Model Comparative Chart

Summary: The DOL's final 401k plan fee and expense disclosure rule requires that plan sponsors furnished participants a chart designed to facilitate a comparison of each investment option available under the plan. This is a model comparative chart prepared by the DOL which may be used by to satisfy the rule's requirement.

Source: U.S. Department of Labor (Word Document), October 2010.

A Guide to Retirement Plan Fees & Expenses

Summary: In this paper, the author will discuss retirement plan fees and expenses to assist plan sponsors in achieving a greater understanding of their plan operations.

Source: Trucker Huss, March 2010.

Justifying 401k Fees: A Challenge for Fiduciaries

Summary: Underlying the current spate of lawsuits over 401k fiduciary misconduct (particularly fee levels, revenue sharing, self-dealing, and active versus passive management) is a simple question: Are participants getting their money's worth for the fees they pay? That seemingly simple question gives rise to a multitude of other questions which are anything but simple.

Source: Investment Horizons , September 2008.

Death to the Prospectus Requirement!

Summary: The DOL is on a roll. As of July 22nd, when they published the proposed participant disclosure regulations, they have delivered on three initiatives. This article focuses on the new participant fee disclosures.

Source: 401khelpcenter.com , July 2008.

A Primer on Indirect Mutual Fund Payments

Summary: When it comes to the fees paid to service providers -- like the recordkeeper and the adviser -- participants almost always bear the brunt of the cost. Fiduciaries must be aware of these payments and potential conflicts and must evaluate them.

Source: Drinker Biddle & Reath LLP, February 2008.

401k Expense Recapture

Summary: The recent focus on fees and expenses is causing many employers to closely examine the fees and expenses of their plans. As a result, some employers have been able to negotiate reduced fees.

Source: Drinker Biddle & Reath LLP, February 2008.


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