Plan Sponsors Need to Be More Aware of Administrative Fees

January 10, 2012 (PLANSPONSOR.com) – Plan sponsors are not fully knowledgeable of their plan administrative fees.

According to Callan’s 2012 Defined Contribution Trends Survey: Where Have We Come From and What Lies Ahead, approximately 13% of plan sponsors do not know what types of administrative fees are applied to their company stock fund. In addition, 19.4% of plan sponsor that have funds with revenue sharing do not know what proportion of their funds pay revenue sharing.

Lori Lucas, DC practice leader at Callan Associates told PLANSPONSOR that based on the survey results, high numbers of plan sponsors are unaware of how their feeds are being paid. “Direct contribution plans have a lot of moving pieces that can be relatively complex. They need to get their arms around these fees. They need to know how they are paying these fees,” said Lucas. The plan sponsor also needs to be able to explain why some are paying fees and some are not.

Other results from the survey show 37.5% of sponsors that credit revenue sharing back to plan participants do not know how this happens. Also, over 16% of plan sponsors are uncertain if their plan offers an ERISA (expense reimbursement) account.

The survey also found the leading compliance concern among plan sponsors was the lack of clarity on how to comply with the U.S. Department of Labor’s 408(b)2 fee disclosure regulations; however, coming in a strong second was no concerns at all about compliance. Lucas said she is under the impression that plan sponsors who lack concern in this matter are looking to their recordkeepers to ensure compliance.