Having a Plan Benchmark Analysis could possibly be the most important analysis prepared for the trustees / fiduciaries of your companys retirement plan. Most trustees / fiduciaries have limited knowledge regarding plan expenses, who is paying them, and how the fees are being collected. This analysis will provide you with a full understanding of the fees your plan is currently paying, national benchmark data (for comparison purposes) on what the plan SHOULD be paying in fees as well as proposals from several highly regarded providers. The analysis will also provide a detailed list of the services the plan, trustees and most importantlythe participants should be receiving for these fees.
Essentially, there are three primary categories of fees associated with a corporate defined contribution plan (excluding the individual transaction fees for loans, distributions, QDROs and others).
Category 1: Investment Expense Ratio this is the fee charged by the investment vehicle for the management expenses related to the fund, ETF or separate account manager. This fee is deducted from the gross return of the fund and collected directly by the investment vehicle.
Category 2: Third Party Administrator (TPA) the TPA is the company that prepares the plans tax forms, maintains the plan documents, computes the various testing as well as performing many other administrative tasks for the plan. These fees are typically paid by the company directly to the TPA on behalf of the plan. However, they can be paid by the plan if elected. Fees typically include a base fee with or without per participant charges. The TPA will also collect the individual transaction fees (mentioned above) and these fees vary from company to company and are different for each transaction.
Category 3: Plan Advisor / Broker / Representative (Advisor) the fees associated with the Plan Advisor are sometimes very difficult to determine, calculate and track. Probably, the most common method is called a wrap fee, which is typically added on top of the mutual fund expense ratio and deducted in the same manner as the expense ratio. The Plan Provider collects these fees and then pays them to the Broker Dealer / Registered Investment Advisor (RIA). Another similar method is the use of 12b-1 fees. This part of the expense ratio is used for marketing/distribution expenses and paid to the advisor. Advisor fees are typically collected and paid to the advisor at the fund level. There are arrangements where the company pays the advisor fees directly; similar to the typical TPA arrangement, but this is not the norm.
In order for us to complete your Benchmark Analysis we will need the following information:
- Annual Plan Sponsor Fee Disclosure 408(b)(2) Notice
- Annual Participant Fee Disclosure 404(a)(5) Notice
- TPA Invoices for the previous plan year
- Most Recent Plan Statement with a listing of all available investment options and related asset values
If you can answer the questions listed above and provide the necessary documentation, we will begin preparing your complimentary Fee Benchmark Analysis. Return the completed form, requested document/statement copies to us via email, fax or regular mail. Contact methods are listed below. Please be sure to provide us with the primary contact information at your company should we have questions and who to notify once the analysis is complete.
Thank you for the opportunity to provide you, your trustees and plan fiduciaries this valuable analysis. We appreciate the opportunity and hope you will find the forthcoming materials of value.