A concise yet complete white paper from Mercer reviews best practices for monitoring and negotiating DC plan fees. Recommendations include:
• Administrative fees should be based on the number of participants with account balances in the plan. Asset-based fees can rise or fall independent of the level or quality of services provided.
• Benchmark and negotiate record keeping and investment fees separately, especially when proprietary funds are included — and if they are, negotiate continuation of most favorable pricing if the prop funds are replaced.
• Fees should be benchmarked and negotiated annually, looking for the lowest share class or even going to CITs and SMAs; with multiple plans, negotiate fund fees in the aggregate for each investment.
Other comments include whether plans should consider levelizing revenue share among participants, monitoring transaction fees and documenting the entire process. As a plan grows, few providers automatically move it into more favorable pricing tranches, so advisors have to regularly look for when price breaks may be available.
