#1
High Risk
Not Understanding or Monitoring Fees
Calculating, understanding and assessing the reasonableness of 401(k) plan fees is an important requirement under ERISA.
- Potential Consequences
- ERISA violations
- Excessive fees
- Fiduciary breach
- Participant lawsuits
- Prevention Tips
- Review annual fee disclosures thoroughly
- Benchmark fees against industry standards
- Understand all revenue sharing arrangements
- Document fee reasonableness analysis
- Consider fee-only service providers
Need Expert Guidance?
Don’t let this mistake jeopardize your plan. Get professional help from experienced fiduciary advisors.
Although it is not an easy task for plan sponsors, calculating, understanding and assessing the reasonableness of 401(k) plan fees is an important requirement under ERISA. Since 2012, retirement plan vendors have been required by ERISA to provide plan sponsors with an annual fee disclosure detailing all fees charged to the plan. But still, making sense of the fees can be a very challenging task.
Providers collect revenue in a variety of ways, some of which may be embedded in the expense ratios of funds utilized within the plan. Evaluating the fees can become even more complex when the same firm provides both investment management and record keeping services.
There are significant cost savings available to the plan sponsor who makes the effort to carefully monitor and control plan costs.
“If you watch the pennies, the Dollars will take care of themselves.”
— H. Ross Perot
