Almac Group, Inc.

A jump in 401(k) plan assets and fiduciary training for the plan committee have spurred a recordkeeping-fee reduction of about 40% over the past five years at Almac Group, Inc. Almac paired its 2018 reduction with a move to a per-participant recordkeeping fee, and fee levelization to neutralize the impact of revenue sharing.

The plan of the Souderton, Pennsylvania-based pharmaceutical R&D services company had a 32 basis point recordkeeping fee before it was reduced 31% to 22 basis points in 2014. Its 2018 cut accompanied a shift from an asset-based recordkeeping fee for participants to a flat per-participant fee. The flat fee totals $87 per participant per year (or $21.75 per quarter). For comparison, the employer says, that’s equivalent to about an 18 basis-point fee. Last year, Almac also shifted adviser fees to the company, rather than the plan, paying for the services of Plymouth Meeting, Pennsylvania-based adviser Centurion Group LLC.

Prompted by its move to Centurion Group five years ago, Almac adopted the advisory firm’s suggestion to issue a recordkeeping request for information (RFI), then utilized that data to negotiate the initial fee reduction. At the same time, “we went through fiduciary training with Centurion,” says Mark Weir, Almac’s vice president finance U.S. “We realized as a committee, ‘We need to protect ourselves.’” The committee added more structure around key responsibilities like fee benchmarking, he adds.

Then last year, Centurion recommended that the committee renegotiate fees again with recordkeeper Fidelity Investments. “The plan assets had jumped in the past four years from about $45 million to $97 million, and that puts you in a different stratosphere with recordkeepers,” Rich Moore, the company’s director of human resources, says. “We were confident in our ability to say to Fidelity that our plan now offered significant economies of scale to a recordkeeper.” He attributes the rapid rise in assets to the stock market’s rally as well as the 2017 increase in the plan’s auto-enrollment default deferral from 3% to 6%.

Almac also looked at how it allocates recordkeeping and administrative fees and decided to shift to the per-participant recordkeeping fee. “It’s all about transparency,” Weir says. “This makes it very easy for participants to look at their statements and see how much they’re paying per quarter.”

The committee discussed that a per-participant fee impacts lower-balance participants more, since they pay a higher portion of their balance. “You can always argue about what is fairest,” Weir says. “But we decided that we generally have a low-turnover staff and increasing balances, so the per-person fee is a better way of handling it.”

Almac also shifted to rebating revenue sharing to participants invested in funds that pay it. “We have tried to eliminate revenue sharing as best we can,” Weir says. But when the sponsor doesn’t have the option to shift share classes to eliminate it, he says, “we decided that as long as investments continue to meet our criteria and do well in their performance, we are not going to swap out an investment for another investment just because it has revenue sharing.”

—Judy Ward