Fees and expenses associated with 401(k) plans have become a central issue for plan sponsors to manage in administering their company’s plan. The article in the July issue of CFO Magazine addressed some of the fiduciary risks for 401(k) plan sponsors and provided seven tips to minimize these risks. The third tip on the list? Benchmarking, benchmarking and more benchmarking.
In the blog that we wrote previously about 401(k) plan fees, it was recommended that you examine and understand the selection process for plan providers and the plan fees. A 401(k) plan fee benchmarking report is a helpful tool in understanding those fees.
As a risk management consulting firm, we feel it is important to mitigate our own business risks, in addition to advising our clients on mitigating theirs. Recently, we completed a benchmarking report for our own 401(k) plan, and strongly recommend our clients and any organization with a 401(k) plan do the same. The benchmarking report measures your company’s 401(k) fees and compares them to other plans held by companies from similar industries, asset-sizes and employee participation rates. You can request a benchmarking report from your 401(k) plan administrator, but ensure it is prepared by an independent third party so it remains unbiased. The benchmarking data will give you a clear look at whether or not your company’s plan fees are reasonable, serves as due diligence in monitoring plan fees and provides a platform for negotiating changes with your provider, if necessary.
Being vigilant and understanding your 401(k) and ensuring you have the proper fiduciary liability coverage in place for your company and 401(k) plan size are just two of the measures your organization can take in mitigating 401(k) plan fee risk and should be part of every company’s risk mitigation strategy.
Click here to request more information about The ALS Group or to learn more about mitigating your 401(k) plan risks.
