Understanding Fee Benchmarking
Benchmarking your plan fees is a critical practice for plan sponsors, ensuring that the costs associated with plan services align with industry standards. According to Callan’s 2024 DC Trends Survey, a substantial two-thirds of plan sponsors indicated they were either somewhat or very likely to conduct a fee study this year. This proactive approach not only fosters fiduciary responsibility but also helps in negotiating better terms and conditions for services offered.
Frequency of Conducting Fee Studies
As a best practice, conducting a fee benchmarking exercise on an annual basis is recommended. This frequency allows for regular assessment of the reasonableness and necessity of the services provided to a retirement plan. Not surprisingly, nearly half of those who actively engaged in fee studies were able to successfully reduce their plan fees, demonstrating the effectiveness of this regular review process.
The Role of a Plan Advisor
Your plan advisor plays a vital role in streamlining the benchmarking process. As a quarterback for these exercises, they can offer guidance that ensures your plan remains cost-effective in light of the services utilized. As fiduciaries, sponsors bear the responsibility to confirm that not only are the services being rendered necessary, but also that the fees associated with them are reasonable—though not necessarily the lowest.
