5 fee-related best practices for 401(k) and 403(b) plans

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Are your retirement plan fees market-competitive? Do you meet your fiduciary obligations regarding provider fee review each year? Consider these best practices relating to fees:

  • The providers generating fees for your 401(k) or 403(b) plan include (at a minimum): the plan's investment adviser, recordkeeper, trustee and custodian. Ensure their fees are reasonable by performing an annual review.
  • In partnership with your recordkeeper, make sure all required fee notices are shared with plan participants.
  • Try to select mutual-fund options that do not pay soft-dollar revenue.
  • Always use the lowest cost mutual-fund share class. There has been significant litigation against plan sponsors who have not done this.
  • Review the cost and performance of all investments at least annually. Place documentation as evidence of your review in your plan files.

And you should also consider:
Lowest cost not required. You are not required by any law or regulation to pay the lowest fees for any provider service. However, the fees you pay must be reasonable. If you wish to contract with a higher cost provider because you believe you will receive better service, you are free to do that.

Provider fees have plummeted. Fees have fallen significantly since the Department of Labor decided to make fee review an issue. If you haven't checked the pricing on the services you receive from your plan providers within the last three years, do so this year.

See also: DOL asks for comments on 401(k) fee disclosure guide

Look at your investment menu. Since provider fees have fallen drastically during the last few years, most have cut their fees as much as they can. For many plan sponsors, any additional, meaningful fee reduction will come from the investment menu. Focus on ensuring that your investment fund line-up is the most cost efficient possible. For example, make sure you are offering a set of index-fund options and you are using collective investment trust funds where appropriate.

Balance fee considerations. We are at the end of what has been a fee frenzy in the retirement plan business. Make sure that cost isn't the only driver when you discuss your 401(k) or 403(b) plan. The plan participant experience should be at the center of all your decisions regarding your retirement plan.

Robert C. Lawton is President of Lawton Retirement Plan Consultants, LLC ( an RIA firm helping retirement plan sponsors with their investment, fiduciary, employee education and compliance responsibilities. He may be contacted at or 414.828.4015.

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