EMPLOYER CONTRIBUTION:  100% on 5%, plus age-/earnings-based contribution from 3.5% to 9%

More than three years ago, UCB, Inc., decided to focus on 401(k) plan fees. “When I joined, in the latter part of 2014, we started looking at the 401(k) plan and all the vendors involved,” recalls Richard Martz, head of rewards and human resource (HR) operations at UCB. That began with clarifying the role of a 3(38) fiduciary investment manager for its plan.

“The role of one plan vendor in particular was unclear: It served as our investment fund manager but not in a fiduciary capacity. The vendor and our plan adviser, Spectrum Investment Advisors, seemed to serve duplicate roles,” Martz says. That meant the plan paid more fees than necessary. “So, to reduce both complexity and cost, we terminated the investment fund manager and formally hired Spectrum as our 3(38) investment adviser.”

UCB, the U.S. branch of a global biopharmaceutical company headquartered in Brussels, now focuses on its 401(k) plan as its main retirement benefit. Itself headquartered in Smyrna, Georgia, the U.S. firm terminated its defined benefit (DB) plan last year, after freezing it in 2005. By the time the sponsor closed down the plan, only about 12% of active employees had a UCB pension. But in addition to its match, the employer still makes an age-/earnings-based contribution—ranging from 3.5% to 9%—to 401(k) participants who started in 2006, after the freeze.

The sponsor has taken several steps to lower the fees 401(k) participants pay, according to Lynne Knapp, UCB’s director of benefits. “We have a longstanding partnership with ADP and have worked closely with it to leverage its technology advancements and reduce [recordkeeping] fees.” Those, she says, fell 46% between 2014 and 2017. “In addition, we decided to expand which participants pay advisory fees, reducing the Spectrum Investment Advisors per-participant fee by half. To be transparent and to follow industry best practices, we made this change so that all participants with a balance—both active and terminated—are now charged a low adviser fee.”

As a result, UCB moved to a $22 quarterly flat participant fee for recordkeeping and advisory services last April. “The legal environment and focus on the fiduciary responsibility of plan sponsors caused us to move to this approach,” Martz notes.

Additionally, UCB has shifted its 401(k) investment menu more toward passive funds and eliminated revenue sharing. “When we started our plan review, we had in excess of 90% actively managed funds,” Martz says. “During this process, we led with a ‘passive first’ mentality, to focus on reducing costs: We would always consider an active fund, but only if its performance versus the index fund justified the additional expense. In most cases, we ended up replacing an active fund with a passive fund.”

As a result, the plan’s total fund expense ratio has fallen by more than half, from 72 basis points (bps) in 2015 to 35 basis points in 2017. “The plan’s investment expenses were reduced by approximately $700,000 annually,” Knapp says. “These fee reductions become even more important as overall plan assets rise.” —Judy Ward

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