TIAA-CREF Offers Framework for Assessing Retirement Plan Fees

TIAA-CREF released a new paper for retirement plan sponsors titled “Deciding What is Reasonable: Assessing Fees Using Value and Outcomes.”

The firm contends many retirement plan sponsors are uncertain about how best to meet their fiduciary obligation to monitor and assess the reasonableness of their plans’ fees. They aren’t quite sure how to use and apply the large amounts of information provided by the Department of Labor’s 408(b)(2) fee disclosure regulations.

According to TIAA-CREF, when assessing fees, plan sponsors frequently focus their attention on seeking out the lowest costs for plan services and investments, but fees are just one part of the story. Many plan sponsors may not fully consider the quality and effectiveness of the services they are receiving and how they contribute to positive outcomes for their employees.

The firm notes it is especially critical for plan sponsors in the not-for-profit environment to rely on a well-thought-out plan for fiduciary compliance given their unique factors, such as the presence of multiple providers, the availability of annuity products, and the portability of plan assets.

To help maintain transparency and make informed assessments about fees, the paper recommends that plan sponsors follow a four-step process by asking themselves the following questions:

• Who is receiving compensation from our plan?
• What are the fees and expenses associated with our plan?
• How do our fees and expenses compare to other service providers or investment options?
• Why is the compensation warranted?

The paper includes a checklist for plan sponsors to use in fee evaluation.

It is available for download here.