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Total Team Solutions Blog

May 31 2016

401(k) Plan Sponsor Survey - focus on fees

By: Rob Lynn

 

Market Strategies International recently reported that more plan participants are scrutinizing 401(k) fees and that plan sponsors are looking more closely into how much they are paying their service providers for their plan’s administration.   Plan sponsors are also monitoring investment fund fees vs. rate of return.   Looking at every aspect of the 401(k) plan costs has become a top priority according to the 1,435 plan sponsors surveyed by Market Strategies over the past few months.    

Plan administration fees are the most common reason for switching record keepers, and likewise are an important driver of satisfaction and loyalty when client expectations are fulfilled, according to the survey.  Beyond investment growth, plan sponsors are seeking value from the service providers and making sure that fees charged to the plan are justified based on the administrative benefits provided.

Investment fund fees are a big cost within retirement plans, and fund fees perceived as excessive are driving more class-action litigation against employers.  These lawsuits usually center around allegations that participants’ retirement savings were compromised because employers, as plan fiduciaries, failed to act in participants’ best interests and breached their duties under the Employee Retirement Income Security Act (ERISA) by allowing high fees, bad fund choices and conflicts of interest.

Simple and clear lessons to be learned from the unprecedented number of ERISA fiduciary breach class actions being filed

  1. Have a process in place to make prudent decisions about plan investments and the retention of service providers. Document those decisions.
  2. Continuously monitor and assess the investments based on return, relative risk to peer group and how reasonable are the plan administrative expenses. 
  3. Document the review process and decisions based on the due diligence.

Since 1988, Total Team Solutions has provided a 401(k) plan to our HR outsourcing clients that delivers a worry free, cost effective plan with ongoing fiduciary review of investments options.  To learn more, please contact Rob Lynn at rlynn@ttspro.com  or 203-459-1777.


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