Fee Disquiet Grows Louder Among Plan Sponsors

November 24, 2003 (PLANSPONSOR.com) - Plan sponsors appear to be getting more for their money - but aren't as sure they are getting their money's worth.

Nearly 60% of the respondents to  PLANSPONSOR’s seventh annual Defined Contribution Survey said that the range of services available from their provider has increased over the past two years—but that was down from the two-thirds that offered that assessment a year ago, and well down from the more than three-fourths that expressed that view in our 2001 survey. Still, just 2.2% of the 2003 respondents said that the range of services had declined.

Quota Status?

Similarly, while nearly 62% of this year’s respondents said their administrative fees had not changed in the past two years, the remaining respondents were roughly split between those citing increases (18.5%) and decreases (16.9%).   However, more than a quarter of plans with less than $5 million in assets said their fees had increased.

While there does not seem to be much movement in the actual fees charged (or at least the schedule used to determine those fees), plan sponsor disquiet with those fees appears to be growing. Looking at the data, one might well take solace in the status quo, since more than 76% of the record 3,246 plan sponsor respondents thought the fees charged for services rendered were “fair.”   Then again, a year ago, 86% were of that opinion.

Fair Fares?

Potentially more troubling was the fact that an incredible 16% said that they did not know if the fees charged by their provider were fair, up from 12% among our 2002 respondents.   Not that their fees weren’t fair, a sentiment expressed by a distinct minority (in theory, those who don’t believe their fees are fair move on) – but that they were not sure if the fees charged were, in fact, fair.

It perhaps is not surprising, therefore, to note that the top-rated items on the plan sponsor “wish list” – the things they would like more of – were fee disclosure and fairness of fees (see  chart ).

Fee disquiet notwithstanding, plan sponsors that have changed providers in the past two years have been remarkably consistent in their rationale. Topping the list again this year was poor service, with a lack of product features cited next most frequently. Fees, however, continued to rank third on that list.