Benchmarking – All About that Fee

Stealing a tag line from the new hit song “All About That Bass” this blog post outlines a practical approach to benchmarking fees in a manner that complies with ERISA 408(b)(2) fee disclosure. As you may recall, ERISA 408(b)(2) is designed to provide a responsible plan fiduciary (“RPF”) with sufficient information to determine if fees are reasonable and conflicts are avoided.

In general, the information a covered service provider (“CSP”) is obligated to provide a RPF includes their fiduciary status, a description of their services, and the fees charged for those services. This information provides the foundation for preparing a quantitative fee benchmarking assessment. Once this information is in hand, it can be loaded into a benchmarking database to run a comparative assessment. Databases with information on many different plans are better than ones that represent a single service provider platform.

For the results to be reliable, the plan must be benchmarked against other plans that are similar in size by plan assets and participant count. The more similar, the more accurate the benchmarking results. It is also best practices for a quantitative assessment to be accompanied by a subjective qualitative analysis from the perspective of the RPF. Complex plans with size advantages may be better off using benchmarking combined with a formal request for proposal (“RFP”) process to validate fee reasonableness.

The depth of your benchmarking report will impact your ability to draw reasonable conclusions about fee reasonableness. Failure to comprehensively consider services rendered, who pays for those services, and how those services are paid are all material elements of sound benchmarking. Taking short cuts in the collection and evaluation of pertinent data, subjects benchmarking results to criticism the process was imprudent. In short, this is one process that cannot be taken lightly.

However, implementing a proper process with appropriate documentation to support fiduciary procedural prudence protects both the plan sponsor and the CSP by preventing a plan from paying unreasonable fees and protecting a CSP from receiving less than reasonable fees for services rendered.

If you would like further information on how to ensure a retirement plan is paying reasonable fees or how to benchmark a plan’s fees, call or email me at 704-699-7031 or

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