To stay in good health, you visit the doctor for an annual physical — before any worrisome symptoms arise. Similarly, when it comes to your 401(k), regular checkups can help screen for early warning signs that plan fees warrant greater scrutiny.
The Employee Retirement Income Security Act of 1974 (ERISA) mandates that plan sponsors and fiduciaries ensure retirement plan fees are reasonable. Failing to do so can expose you, and the plan sponsor, to significant legal and financial risk. Appropriate benchmarking, with the right tool, is an excellent way of helping to meet this requirement and maintain the fiscal health of retirement plans. Unfortunately, neither ERISA nor the Department of Labor specify how often plan fees should be benchmarked in order to remain compliant.
The Case for an Annual “Fee-sical”
Given the consequences for failing to adequately monitor fees, and today’s increasingly litigious business climate, annual benchmarking can provide greater protection than a two-, three-, or four-year interval. Benchmarking fees against comparable plans on a yearly basis can also help identify additional opportunities for cost savings — which, if you ultimately renegotiate with existing service providers or put your plan out to bid, can be passed along to the organization and plan participants.
Controlling retirement plan costs can help ensure the plan remains competitive, adding value as an effective recruitment and retention tool. But plans with pricier fees and higher levels of service can also be an easier target for 401(k) lawsuits. If your plan is one of them, annual benchmarking can help confirm that those higher fees remain necessary from year to year and continue to align with the organization’s needs and goals.
More Bang for Your Benchmark
As a financial professional, regular benchmarking can help keep you informed of emerging trends in your industry. And more frequent face time with your client can go a long way toward keeping your professional relationship on solid ground. You know the time and effort it takes to replace a client lost to a competitor — the additional “check in” offered in the form of annual benchmarking can aid in customer retention.
When determining the frequency with which to benchmark, always consider any changes within the organization that could prompt a need to reevaluate fees, such as a rapidly growing plan or changing workforce. For example, because per-participant based fees tend to decrease as plans grow, if a plan with an asset-based fee model goes through a period of sizable growth, it could easily find itself overpaying relative to other plans with similar numbers of participants. Or, rapid changes in participant demographics could drive a need for new services that impact costs. A successful college recruitment program could, for instance, bring with it an influx of new millennial employees with a greater need for certain types of financial wellness programming — or increased demand for online delivery of educational services.
Check In or Checkup: PlanFees Makes It Simple
With unparalleled accuracy using live-bid data, PlanFees lets you easily and conveniently generate professionally crafted, personally branded reports on your desktop or smartphone in less than two minutes for your clients. And you can quickly and easily customize the data ranges of plan assets and participants for your comparison benchmark to ensure that the analysis is accurate and meaningful.
Our seamless web portal and mobile experience combines an easy benchmarking tool with in-depth live-bid sourcing. And advanced optical character recognition technology lets you benchmark on-the-fly simply by scanning a photo of a provider fee disclosure. Benchmark on-demand, and more often to offer a higher level of service and greater value to all your clients. You can save time — and help your clients save money — by becoming a PlanFees partner today.