It may not turn out to be the very last word on the Prof. Ian Ayres debacle, but this dispatch from the estimable Marcia Wagner notes the important obligations that plan sponsors face to monitor and negotiate appropriate 401(k) fees — obligations that the Yale Law School professor’s unfortunate choice of research methodology and questionable motivation serve to highlight. These include performing a suitability analysis and making a determination that the cost of the plan is reasonable in relation to the value of the services it receives.
Wagner recommends a plan cost review based on four questions:
• What are the different fees and services?
• Was a benchmark used to measure reasonableness, and is it appropriate?
• What conflicts exist, if any, with the plan’s service providers?
• Are the services provided and their fees the result of due diligence?
As Wagner notes, the most important fiduciary question of all is not: “Is the plan the absolute lowest-cost plan on the market?” Rather, it is: “Is the value that the plan receives for its cost reasonable?”
How can any development or event (or veiled threat, for that matter) which drives home that important point be all bad? And that, it seems, is the silver lining of this latest brouhaha afflicting the retirement industry — courtesy of Prof. Ayres.
