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.
Sign Up For Our Newsletters
(They're great, we promise)
Explore
Connect With Us
California Office (Headquarters)
Wealth Management & Institutional Services
2040 Main Street, Suite 720, Irvine, CA 92614
Arizona Office
Wealth Management
1643 E. Bethany Home Road, Phoenix, AZ 85016
