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CCH® PENSION — 8/22/08

Fees Remain Elusive For Up To 25% Of 401(k) Plan Sponsors, Survey Finds

From Spencer's Benefits Reports: Almost one-fourth of defined contribution plan sponsors (23%) are not fully confident that the fees and expenses associated with their 401(k) plans have been properly disclosed, according to a survey of 150 plan sponsors recently conducted by Mercer. Another 25% of those surveyed reported that their plan vendors have not yet disclosed the amount of annual revenue sharing that they receive from the plan’s investment managers to pay for administrative expenses.

Revenue sharing is paid directly to the vendor by 71% of those surveyed, with 44% paying no explicit administrative fees. Mercer found that when explicit administrative fees are charged, participants are slightly more likely than plan sponsors to be paying the fees (47% versus 43%). The most common transaction fees are for loan initiation (cited by 74% of those surveyed) and loan maintenance (39%).

The survey found that 68% of the respondents have benchmarked their investment fees within the past 12 months; 33% have utilized a third-party data base, 21% have relied on vendor information, and 14% have compared their fees to other survey data. The 65% of respondents that have benchmarked their administrative fees broke down, as follows: 21% have utilized a third-party data base, 19% have conducted a request for information. 14% have compared survey data, and 11% have relied on vendor information.

According to Amy Reynolds, a Mercer principal, “Mercer considers it a best practice to determine administrative fees on a per-capita basis independent of the source of the revenue. However, plan sponsors that prefer to continue to utilize investment revenues to offset administrative expenses should next focus on attaining an equitable allocation of administrative cost across their participant population.”

For more information, visit http://www.mercer.com.

 

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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