Not Fee Sure… Sponsors Lack Confidence in Fee Disclosures

Among the 150 defined contribution plan sponsors surveyed, 23% said they are not fully confident that investment fees and administrative costs have been properly disclosed, and 25% said their plan vendors have not yet disclosed the amount of annual revenue received from their plan’s investment managers to pay for administrative services, according to a Mercer press release.

The survey also found more employers have implemented formal fee monitoring and benchmarking. Among employers that have benchmarked administrative fees, 68% did so within the past 12 months.

The press release said nearly three-fourths (71%) of the employers surveyed indicated revenue sharing is paid directly to vendors, while 44% reported they pay no explicit administrative fees. Participants are likely to cover the cost when explicit administration fees are charged (47%), and transaction fees are most often charged for loan initiation (74%) and loan maintenance (39%).

“Plan administrators have been formalizing fee monitoring and benchmarking in anticipation of federal requirements around disclosures, as well as in response to the rash of lawsuits initiated on behalf of plan participants,” said Amy Reynolds, a Mercer principal and defined-contribution retirement plan consultant, in the announcement.

Among survey respondents, 51% have 5,000 or more participants and 36% have from 1,000 to 5,000 participants. More than one third (35%) have assets over $500 million and 31% have assets between $100 million and $500 million.

In July, the U.S. Department of Labor unveiled the final portion of its three-part plan disclosures regulatory package that calls for sponsors of employee-directed plans to supply participants with basic plan information including investment returns and expenses (See EBSA Finishes Regulatory Package with Participant Disclosure Proposal ).