Thanks to fee disclosure regulation and litigation against plan sponsors, plan sponsors are focusing on the costs of administering their plan. That’s great, but there’s a problem because of the focus. A study recently shows that mot plan sponsors see reducing costs as a primary focus of a plan sponsors, but that means they totally doesn’t get the Fiduciary responsibility about fees.
Plan sponsors as a Fiduciary have the responsibility to pay only reasonable costs, reasonable costs isn’t the same as lowest costs. If a plan sponsors is being charged a fair fee from a competent plan provider in relation to what other providers charge for a similar service, they don’t have to change. There areno requirements for plan sponsors to find cheaper providers. If a plan sponsor is using a third party administrator that is charging a reasonable fee and doing a good job of plan administration, there is absolutely no reason that a plan sponsor to change.
Fee disclosure regulations was manna from heavens for providers like me who were preaching fee transparency before it was cool. We always knew that one of the drawbacks about any fee transparency is that plan sponsors would think that this was some sort of requirement for the, to hire the cheapest providers and the race to zero in terms of lower plan costs was going to be a problem.
So dear plan sponsors, you don’t have to get the cheapest provider, just a competent providers who charges a reasonable fee, OK?