New disclosure rules and the threat of fiduciary violation lawsuits have helped bring down investment management, recordkeeping and other fees in 401(k) and other retirement accounts. Now revenue-sharing is following suit.
According to a 2013 survey by Boston-based investment consultancy NEPC, total plan costs for sponsors declined 0.02 percent from 2012 to 2013, falling to 0.53 percent. That’s equivalent to a yearly charge of $5.30 for every $1,000 invested. That figure had been 0.59 percent in 2010, so the savings are in the many millions of dollars.
Gregory C. Lewis, a principal at Boston’s Pinnacle Financial Group, said the DOL had good intentions in mind in adopting its new disclosure rules. “Since qualified plans can be costly undertakings, and participants bear the majority of plan costs, the DOL has endeavored through 404(a)(5) to educate participants about the various costs and fees that impact their plan accounts,” he said.
But the DOL has fallen short in its bid to adequately inform participants, according to Evan Rapp, managing partner with RPG Consultants, Valley Stream, New York.
• Confirm that the compensation proposed for the recordkeeper or other service provider under the arrangement is reasonable. … Ask the provider to provide a chart showing each form of direct and indirect compensation and the corresponding fees/rates expected to be received. … Reviewing the information in this format may provide for a more comprehensive review.
• Ask your consultant (or other provider) to confirm that the revenue-sharing formula … are consistent with (or more favorable than) market trends.