The Employee Retirement Income Security Act mandates that plan fiduciaries and administrators ensure reasonable fees are being charged for all services offered under a qualified retirement plan. For 401(k)s, behind-the-scenes fees for investment management and recordkeeping are included, as well as trust and custody, just to name a few. These funds quickly accrue and are passed on to plan participants in one form or another. The big question for any plan sponsor is: How do I make sure these fees are reasonable?
They ask this not only because it is their fiduciary and regulatory duty to ensure fees are cost-conscious for participants, but also because of the looming threat of lawsuits. Plan sponsors that fail to uphold their obligation could pay for it later — often to the tune of millions of dollars — through class-action settlements and regulatory penalties. Just look at recent examples in the news with cases against Northwestern University, Bessemer Trust and Home Depot, among others.
