In the final post in our series entitled “Are These Fees Unreasonable?” we address Recordkeeping Fees. (For the two previous posts, see Are These Fees Unreasonable? – Part 1 of 3 – Inv. Advisory Services and Are These Fees Unreasonable? – Part 2 of 3 – Inv. Management Fees)
To recap, FRA PlanTools offers a Benchmarking Report through its web based PlanTools Risk Management System. The report benchmarks the fees paid by a retirement plan for the services rendered against other plans of similar size by plan assets or participant count using a proprietary, independent and objective database.
As a service to the industry for the purpose of starting or continuing the conversation about fees, we are publishing our internal data for the 95th percentile of fees entered into our system for (1) Investment Advisory Services, (2) Investment Management Fees, and (3) Recordkeeping Fees. What this means is that 95% of the retirement plans in our system pay at or less than the amounts found in the charts below. The data was pulled from our system on June 30, 2013.
I think this chart is especially relevant this week with the proposed settlement in the excessive fee case filed against International Paper. One of the allegations there was that the plan overpaid for recordkeeping by $58 million because it was paying $112 a head rather than $52. But how/why does this apply to a plan with less than $10 million in assets? Because the fiduciary duties are the same. Regardless of the size of the plan, the fiduciaries have an obligation to ensure that the fees paid from plan assets are reasonable. One of the most cost effective ways to do that is through benchmarking. Bottom line: if your plan or a plan that you service is paying anything close to the numbers below, it is time to grab the bull by the horns and figure out why.
Click here to download the infographic in PDF form: FRA PlanTools – Are These Fees Unreasonable – Part 3 – Recordkeeping Fees.