REVIEW: Excessive-fee suit targeting $9 million 401(k) plan could be ‘harbinger’ for industry

A recent Investment News article highlights the importance of reviewing provider fees and services for 401k plans of all sizes. Historically, many of the excessive-fee lawsuits have been aimed at much larger plans with thousands of participants and multiple millions or billions of dollars in plan assets. This new case is a signal to all employers that retirement plans of any size could become targets of the plaintiff’s bar.

Employers offering a retirement plan are obligated to act in the best interests of their retirement plan participants. This includes monitoring plan fees and service providers. The defendants in this recent case are learning the hard way that failure to do so will result in personal and professional liability.

The best way for an employer to reduce their risk and ensure the plan’s fees are reasonable is to periodically conduct a review of their retirement plan. This review should include an evaluation of the services the plan needs, provider compatibility, and the costs associated with the current providers and investment options. Once an employer has determined a baseline for comparison, they should request pricing from other providers specific to their plan demographics.

Ensuring an apples-to-apples comparison is one of the most important aspects of benchmarking plan fees. Once this process is complete, an employer should be able to determine if they need to adjust their services or fees to stay in line with the market rates (remember—the fees have to be reasonable, not the cheapest). Any decisions made as a result of the review should be documented to show that a process was followed.

While a plan review may seem daunting, it doesn’t have to be overwhelming. Partnering with an experienced retirement plan advisor or independent consultant to guide you through the process can save a great deal of time and stress.

To learn more about what is involved with a retirement plan review, download our e-book, “Reviewing Your Retirement Plan.” The e-book also contains links to provider evaluation criteria and a template you can use to document the review process.


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