Negotiating Retirement Plan Fees with Your Provider

According to plan sponsors, one of the most harrowing aspects of their fiduciary obligations is to ensure that plan fees are reasonable. From administration and recordkeeping to compliance and investment management, how can a plan sponsor feel assured that they are aware of all plan fees, understand them thoroughly and then determine their fair and reasonableness? It’s quite a task! Best practices dictate the use of live-bid fee benchmarking such as the B3 report as the exclusively valid method of determining fee reasonableness. Once produced, that analysis serves as documentation of the plan fees falling within a reasonable range. Or does it? What happens when the data shows that your plan provider’s fees are higher than the bidding providers? Even though your provider may be meeting your plan needs and service expectations well, you may be concerned when the analysis demonstrates that your plan fees are outside of range and significantly higher than the bidding providers. In this situation, consider engaging in a fee negotiation with your provider. The following are steps to pursue:

• Named anonymously, deliver the bidding provider range of fees to your incumbent provider. It’s important to emphasize that the results of the B3 benchmarking process are based on: 1) a live-bid benchmarking process and 2) all bidders are provided the current plan demographics and plan design/service structure. As such, the results are a true apples-to-apples comparison and thus extremely compelling.
• Request that the incumbent provider award a fee concession within range of the bidding providers. In most cases, fees are brought down to at least the mid to slightly above mid-range of fees.
• Let your provider know that they are not expected to be the lowest, but that you have a fiduciary responsibility to ensure pricing is fair and reasonable for services delivered.

As is the case anytime you fee negotiate, the process can be tricky. As your dedicated plan consultant, we are uniquely qualified and proud to undergo this cumbersome and complex task for you on a regular basis so that you feel confident in meeting your fiduciary obligation to ensure your plan fees are fair and reasonable.

ACR#216789 10/16