Fee Leveling

One share class may not fit all.

With the increase in fee-related ERISA lawsuits, many plan sponsors are choosing to implement a level fee arrangement to provide more fee transparency and an equitable allocation of the administrative fees to operate the plan among all participants. A table below will outline several of the pros and cons of implementing level fees so you can consider if it is right for your plan. First, though, what is Fee Leveling?

Are there any other considerations?

The table of pros and cons outlines the “optimal” share classes, rather than the “lowest expense ratio” share classes.

Pros

Cons

Current Regulatory Environment (recent litigation around fees)

Full transparency of all plan-related fees at the Plan Sponsor and participant levelText

None

Investment Selection Process

Fiduciary Committee no longer needs to be concerned about revenue sharing payments to offset recordkeeping fees

None

Investment Option Expenses

Optimal share classes may be used to ensure plan fees are as low as possible

None

Participant Statements

None

Participants will start seeing account charges on their statement, in addition to credits for revenue sharing where applicable

Administration

Most recordkeepers offer an automated solution to rebate revenue and charge a level fee to participants

Additional process may allow for administrative errors

Plan Governance

Process-driven method that explains how fees are assessed to participants and why specific share classes are being utilized

None

Excess Revenue

There is no need to manage excess revenue generated by the funds in the ERISA budget

No additional revenue will be available to pay for other Plan-related expenses (e.g., auditor fees). All expenses will need to be charged to participant accounts or paid by the employer

 

Investment Consulting

Vendor Management

Fiduciary Governance

Participant Services

Complimentary Fee Analysis and Investment Review

All we need is a copy of your 408(b)(2) Plan Sponsor Fee Disclosure and we will provide a report which benchmarks fees and investment performance against industry averages.

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