As a business owner, C-suite executive, or HR professional, you already understand the value of monitoring costs and maintaining close relationships with vendor partners. However, when it comes to 401(k) plans and their service providers, many plan sponsors express a high degree of confusion and dissatisfaction with understanding exactly how much they are being charged, and what they receive in return for those fees.
Typical scenarios for such service providers include quarterly invoicing with little explanation of the services provided or how the fees are generated. Maybe you see this vendor once a year, or maybe not at all. And the only time you speak to them is when you are the one reaching out. Often, the service provider is quite content with this type of absent, behind-the-scenes relationship. But you shouldn’t be.
Unfortunately, we see this all too often when it comes to 401(k) plans and their service providers. Many companies we speak with say they already have an advisor or broker for their company’s retirement plan. When we probe a little deeper to find out what kind of services that advisor provides, we hear answers like, “Well, the broker is our owner’s personal advisor,” or, “We’ve been with him/her for a long time and aren’t looking to make a change.” Rarely can they tell us the services or deliverables the broker provides or when the last time the broker came out to meet with their employees to review the plan.
Further compounding matters, 401(k) plan fees are usually paid by someone other than the company. In most cases, they come out of the 401(k) plan balances themselves. This means that the employees are paying for services that they aren’t really receiving.
If you sponsor a 401(k) plan for your employees, you have fiduciary obligations to monitor service providers and ensure the plan pays only reasonable fees. Neglecting to do so not only carries quantifiable risk in the event of an audit, but it also does a disservice to your employees, potentially leaving them with inadequate retirement savings.
Furthermore, as a plan fiduciary, you can be held personally liable for a fiduciary breach. It’s crucial that you take the initiative to evaluate and benchmark service providers and fees at least every 3 years — a service RPS automatically provides for each of our clients.
Isn’t it time your company and your employees received the level of service you’re paying for?