Plan Sponsor Fee Benchmarking

Under the Employee Retirement Income Security Act of 1974 (ERISA), retirement plan sponsors have a fiduciary duty that requires them to act solely in the interest of plan participants and beneficiaries. Plan fees and expenses are important considerations for all types of retirement plans.

The DOL Employee Benefits Security Administration (EBSA) has provided guidance on ERISA plan expenses. These costs are divided into two categories: settlor expenses and plan expenses. Settlor expenses typically benefit the plan sponsor and are not directly tied to participant benefits. Plan expenses that are reasonable and benefit plan participants can, generally be paid out of plan assets.

Understanding and evaluating plan fees and expenses associated with the plan services are an important part of a fiduciary’s responsibility. These specific costs may include:

  • Investment Advisor
  • Third Party Administrator (TPA)
  • Record-keeper
  • Custodian
  • Investment Managers

Plan fiduciaries are not only responsible to control total costs, but each component expense for every service provider as well. Since this responsibility is ongoing, you should expect your investment advisor to coordinate, cumulate and benchmark your plan fees periodically to ensure that your costs are reasonable for the services provided.