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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.

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

A Primer on Plan Fees

Abstract: 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

A Guide to 401k Fees and Fee-Related Liabilities for Retirement Plans

Abstract: 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 Process

Abstract: 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 Reasonableness

Abstract: 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 Farewell

Abstract: 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 Fiduciaries

Abstract: 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 Fees

Abstract: 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 Panacea

Abstract: 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 Methodology

Abstract: 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

Three Ways Your 401k Plan is Double Dipping on Fees

Abstract: Is your 401k service provider double-dipping? Here are a few ways that service providers could be double-dipping on their fees at your expense and what actions you should take so you can be a retirement plan hero for your employees.

Source: Brightscope.com, November 2016

Fee Allocation: Which Methodology Is Best for Your Plan?

Abstract: Fee allocation within DC plans continues to be a major topic of conversation among retirement plan oversight committees. An issue over which plan sponsors are showing greater concern is whether these participant fees should be calculated based on a percentage of assets or whether all participants should be assessed the same flat dollar fee.

Source: Cammackretirement.com, November 2016

What The DOL's Final Fiduciary Rule Means for Plan Committees

Abstract: The author explains that the increase in potential fiduciary liability under ERISA might mean that retirement plan committees members might wish to review and possibly increase their fiduciary liability insurance. Additionally, because of a perceived higher risk of liability as a fiduciary, the fees charged by a service provider that is now being treated as a fiduciary may be higher and that might suggest a reconsideration as to whether those higher fees remain reasonable.

Source: Wagnerlawgroup.com, November 2016

Understanding and Monitoring Retirement Plan Fees -- Podcast

Abstract: Jeremy Tollas, Senior Consultant with Plante Moran Financial Advisor's Institutional Investing practice, discusses the importance for sponsors to understand the fees in their organization's retirement plan, as well as ways to help monitor and document those fees on an ongoing basis.

Source: Plantemoran.com, October 2016

Assessing Compensation Reasonableness of Retirement Investment Advisers

Abstract: The Best Interest Contract Exemption forces retirement plan advisers to divest all unreasonable compensation. But what exactly is reasonable? This 12-page paper from Dalbar examines this question and offers some answers directly from the orders of the US Supreme Court.

Source: Dalbar.com, September 2016

Small Business 401k Fee Study

Abstract: Since launching its fee comparison service, Employee Fiduciary has accumulated a large database of 401k fees. This article is a summary of the fees they found for 121 401k plans with less than $2MM in assets. 401k fiduciaries can use this study to help evaluate their plan fees for reasonableness.

Source: Employeefiduciary.com, August 2016

Beware the 403(b) Fee Monster

Abstract: Investment fees matter. A lot. Sometimes numbers alone don't convey how damaging high fees are to savings. Meet the Fee Monster.

Source: 403bwise.com, August 2016

Excessive Fee Litigation Hits Education Sector

Abstract: The law firm of Schlichter, Bogard & Denton has now turned its attention to the education sector, filing separate class action lawsuits against three universities on behalf of over 60,000 employees in their defined contribution retirement plans, both 401k and 403(b).

Source: Ntsa-net.org, August 2016

401k Plans Still in the Crosshairs: New Cases Challenge Plan Fees

Abstract: Now that many of the cases contending that large 401k plans paid fees that were too high have been settled or decided, it would be tempting for sponsors of plans that haven't been sued to breathe a sigh of relief. They should not do so, because litigation continues unabated with new theories and new targets.

Source: Cohenbuckmann.com, July 2016

ICI Reports Continued Downward Trend in Mutual Fund Fees in 401k Plans

Abstract: The cost of investing in equity mutual funds through 401k plans fell again in 2015, marking a 31 percent decline since 2000, according to an annual research study that the Investment Company Institute.

Source: Ici.org, July 2016

401k Plan Sponsors Are Focused on Fees

Abstract: As more plan participants scrutinize 401k fees, plan sponsors are re-examining how much they're paying their service providers for plan administration, reveals the annual Retirement Planscape report by market research firm Market Strategies International.

Source: Shrm.org, May 2016

Excessive-Fee Suit Targeting 401k Plan Could Be 'Harbinger' for Industry

Abstract: A new class-action lawsuit targeting excessive 401k fees in a $9 million plan could herald a new frontier of sorts in this type of litigation. The suit, Damberg et al v. LaMettry's Collision Inc. et al, alleges plan fiduciaries breached their duties under ERISA for allowing excessive fees to be charged for investments and record keeping and administration.

Source: Investmentnews.com (registration may be required), May 2016

Cogent Report: Fees Most Common Reason for Switching Recordkeepers

Abstract: Report found that plan administration fees are the most common reason for switching recordkeepers, and likewise are an important driver of satisfaction and loyalty when client expectations are fulfilled. Importantly, the aspect of providing good value for the money is the leading enhancer to brand consideration this year, reinforcing the point that plan sponsors are seeking value from a provider.

Source: 401khelpcenter.com, May 2016

Determining the Reasonableness of Retirement Plan Fees

Abstract: Fees paid for retirement plan investments and services have always been an important consideration for ERISA fiduciaries. However, in recent years these fees have come under increased scrutiny. This 8-page Vanguard paper walks plan sponsors through their fiduciary duties pertaining to fees. The paper discusses a variety of steps and tools to help determine the reasonableness of plan fees.

Source: Vanguard.com, March 2016

Don't Be a Target -- Retirement Plan Fees and Expenses

Abstract: A rising number of challenges are being initiated by the plaintiffs' bar and DOL investigators in the area of retirement plan asset charges and retirement plan expenses. Retirement plan sponsors and other plan fiduciaries should take heed of this trend and consider taking the actions outlined here.

Source: Poynerspruill.com, March 2016

Assessing Fee Fairness: Characteristics of an Effective Plan Fee Structure

Abstract: This 14-page paper develops a set of four conditions for gauging the effectiveness of fee structures: adequacy, administrative ease, transparency, and fairness. These four standards will help plan sponsors satisfy their fiduciary responsibilities by ensuring administrative fees are reasonable and fairly distributed among participants.

Source: Tiaainstitute.org, March 2016

Allegations of Excessive Fees Predominant in ERISA Litigation

Abstract: An awareness of current ERISA litigation can help ERISA fiduciaries better understand their ERISA-mandated duties and facilitate compliance. Article lists cases that are good reminders of the importance of understanding the rules of ERISA.

Source: Francisinvco.com, February 2016

Fee Allocation in 401k Plans: Choose Your Model

Abstract: There are a number of options available to allocate plan expenses among participants. This article explores the three most popular models.

Source: Shrm.org, February 2016

How Should Retirement Plans Pay Their 401k Fees?

Abstract: Helping 401k plan sponsors navigate the fees they're paying to service providers and the various mechanisms through which to pay them is becoming an increasingly important component of 401k advisers' jobs.

Source: Investmentnews.com (registration may be required), February 2016

Fee Allocation in Retirement Plans

Abstract: There are numerous options available to allocate plan expenses among participants, each having its own positive and negative attributes. Paper explores the three most popular models and the associated benefits and drawbacks.

Source: Cammackretirement.com, February 2016

Attorney Schlichter Preps New Round of 401k Suits

Abstract: Jerome Schlichter, a trailblazer of the 401k fee litigation that's proliferated in the U.S. over the past decade, seems to be gearing up for another round of class-action complaints. He is riding on a wave of success, broadening growth of similar 401k legal battles and the wind-down of older suits.

Source: Investmentnews.com (registration may be required), January 2016

Low 401k Fees Aren't a Legal Cure-all

Abstract: The class action lawsuit filed against Anthem Inc. over the fees paid by participants in its 401k plan is a warning to companies sponsoring such plans, and those advising them, that low fees aren't enough to protect against such suits.

Source: Investmentnews.com (registration may be required), January 2016

A New Fee Challenge for Retirement Plan Sponsors: Levelization

Abstract: Plan sponsors, as a whole, are unaware that participants pay disparate fees, and service providers, particularly recordkeepers that receive revenue-sharing payments, are not going to address it, experts say. It is incumbent on sponsors, then, to ask their plan advisers and recordkeepers about fee levelization.

Source: Plansponsor.com, January 2016

Assessing Fee Reasonableness by Implementing a Prudent Process

Abstract: Author discusses the third step in a three-step process of assessing the reasonableness of service provider arrangements and fees.

Source: Erisafiduciaryadministrators.com, November 2015

The Real Cost of Fees

Abstract: Based on the findings in this 23-page report, there is a wide range in the cost of fees associated with investment accounts, yet even the lowest average cost represents hundreds of thousands of dollars in lost savings. If the capital currently lost to fees remained invested, retirement savings could increase by an equally significant amount.

Source: Personalcapital.com, October 2015

2015 DC Plan and Fee Survey: What a Difference a Decade Makes

Abstract: NEPC's Defined Contribution practice group conducts an annual defined contribution plan and fee survey to help plan sponsors understand the fees, pricing, and structure of their defined contribution plans. This 2015 survey includes data from 116 plans, encompassing over 1.4 million plan participants.

Source: Nepc.com, October 2015

Is Everyone Paying Their Share of 401k Fees?

Abstract: Continuing focus on defined contribution plan fees by litigators, regulators and the media has made it clear that fiduciaries must understand and determine "reasonable" fees being paid from a DC plan. Equally as important, though not as widely discussed, is consideration of whether existing payment methods fall disproportionately among participants.

Source: Xerox.com, September 2015

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

Abstract: This 32 page report concludes that the downward trend in the expense ratios that 401k plan participants incur for investing in mutual funds continued in 2014. The average expense ratio that 401k plan participants incurred for investing in equity mutual funds fell from 0.58 percent in 2013 to 0.54 percent in 2014.

Source: Ici.org, August 2015

Benchmark DC Plan Fees Now to Lower Your Personal Risk

Abstract: Continuing focus on DC plan fees by litigators, regulators and the media has made it clear that fiduciaries must understand and determine “reasonable” fees being paid from a DC plan. Since fiduciary liability is personal, sound risk mitigation calls for a rigorous process to establish reasonable fees on an ongoing, regular basis.

Source: Xerox.com, August 2015

Best Practices for 401k Fees

Abstract: Here are 10 steps designed to assist employer-fiduciaries in meeting their fee-related responsibilities, reducing the risk of fiduciary liability and increasing the value of the employer's 401k plan to participants.

Source: Poynerspruill.com, May 2015

How to Unearth Hidden Fees in 401k Plans

Abstract: Opaque fee structures lurk among the complexities of 401k plans, meaning that sponsors might be leaving money on the table. Awareness of the inherent costs can help streamline management of defined contribution plans while keeping within regulatory guidelines.

Source: Institutionalinvestor.com, March 2015

Three Easy Steps for Small Businesses to Evaluate 401k Fees

Abstract: Contrary to popular belief, it can be easy for small businesses to cut through the red tape and evaluate their 401k fees, even the ones that don't appear on a Form 5500 or quarterly statements. You just need to know where to look for fees and how to benchmark them.

Source: Marketwatch.com, February 2015

ERISA Fee Litigation: Is My Plan at Risk?

Abstract: In light of these recent court settlements, plan sponsors may have wondered if their plan could be susceptible to an ERISA case over excessive fees. Here are a few things to consider.

Source: Retirementtownhall.com, January 2015


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