With the government looking into improving disclosure of fees in 401(k) plans and expected to issue new guidelines before the end of the year,
“Given the high profile of this topic, both in the media and in the courtroom, we strongly recommend that DC plan sponsors take a proactive rather than reactive approach,” said Bill McClain, a principal at Mercer.
Specifically, Mercer recommends that plan sponsors ask administrators to provide them with all documentation on current fee and revenue-sharing arrangements, including hard-dollar fees, asset-based fees and underlying expenses, such as trading costs and administrative costs.
Mercer has also compiled industry averages on various 401(k) fees so that sponsors can better determine if their rates are competitive with the market.
“By documenting fees from all sources and then benchmarking those fees against the current marketplace, plan sponsors often find they have a basis for negotiating reduced fees,” McClain said.
In addition, Mercer is recommending that plan sponsors discuss whether additional fee disclosure to plan participants is warranted and make certain that they are rigorously monitoring, reviewing and working to reduce fees in their 401(k) plan.
