Retirement Insights
Rein in Excessive Retirement Plan Fees
September 10, 2024
There are nearly two dozen fees that can be charged to retirement savings plan sponsors and participants. Your organization is likely being overcharged for its 401(k) or 403(b) plan — and those costs can be significant.
Under the Employee Retirement Income Security Act (ERISA), employers are responsible for knowing the full extent of all expenses borne by their retirement plans and determining if they are reasonable. A benchmarking analysis of your plan’s fees can help you understand these expenses and methods to reduce costs.
Retirement Plan Fees Are Not Straightforward
It’s important for employers to understand the multiple types of fees and ways they’re charged for retirement plans. Fees typically fall into three buckets:
There are also levels and layers within these categories that increase the complexity of retirement plan costs. And they can vary greatly, depending on the size of your plan, the number of participants and the plan provider. Many employers don’t understand the full extent of the fees that can be charged, and as a result may be paying too much.
For example, advisory and recordkeeping fees are often embedded in investment expenses to pay the advisor or broker associated with the plan. Benchmarking your plan to evaluate all charges gives you the opportunity to negotiate for fee reductions, which may range from several thousand dollars to more than $100,000.
Finding Excess Fees, Negotiating Reductions
USI Consulting Group (USICG) delivers a customized fiduciary expense analysis for clients. We independently benchmark and evaluate all fees, and compare your plan against others’ using our proprietary process:
USICG’s consultants act as co-fiduciaries for clients, helping them mitigate risk in the administration and investment oversight for their retirement plans.1 The benchmarking and analyses we conduct indicate most employers are being overcharged for their plans, with USICG finding fee savings in more than 75% of the retirement plans we review.2 Determining where fees can be reduced and negotiating fee reductions are important services that help employers lower plan costs and avoid potentially costly penalties, fines or legal exposure.
Case Study: Lower fees, increased services
For a Midwest food and hospitality provider, USICG’s benchmarking and evaluation services resulted in tremendous recordkeeping fee savings. The client hired USICG as the plan’s co-fiduciary investment advisor and consultant. USICG used its proprietary database to benchmark the plan and noted opportunities to lower fees.
Through a fee negotiation with the recordkeeper, USICG leveraged its market scale and recent request for proposals that were run for other clients to secure a 52% reduction of annual recordkeeping fees, while enhancing services to alleviate administrative issues, including the streamlining of payroll processing.3
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Upcoming Webinar | The Perks of an Enhanced ESOP Exit Strategy
Join us on September 26th to learn how an Employee Stock Ownership Plan (ESOP) can provide financial security, preserve your company’s legacy and create a motivated workforce – all while achieving your exit strategy.
Attendees are eligible for CLE, HRCI and CPE credit.
How USI Consulting Group Can Help
We help our clients:
- Gain leverage to negotiate and reduce fees
- Improve returns and retirement outcomes for employees
- Reduce fiduciary liability and mitigate potential excessive fee lawsuits
To learn how we can help you, please contact your USICG representative, visit our Contact Us page or reach out to us at information@usicg.com.
1 Investment advice provided to the Plan by USI Advisors, Inc. Under certain arrangements, securities offered to the Plan through USI Securities, Inc. Member FINRA/SIPC. Both USI Advisors, Inc. and USI Securities, Inc. are affiliates of USI Consulting Group.
2 Cost reductions to the plan will vary and are dependent upon various factors including, but not limited to plan size, total assets held, management fees, administrative costs and services provided.
3 Actual results will vary. The use of any stated benefits in this case study is intended for illustrative purposes only and may not be used to predict or project future results.
This information is provided solely for educational purposes and is not to be construed as investment, legal or tax advice. Prior to acting on this information, we recommend that you seek independent advice specific to your situation from a qualified investment/legal/tax professional. | 1023.S0721.0063
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