Reader Responses June 25, 2012

SURVEY SAYS: Do You Benchmark Your Retirement Plan Adviser?

Last week, I asked NewsDash readers, “Do you benchmark your plan adviser?”
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Of those responding, 43% said they do so every two to three years, and 29% said they do so every four to five years. Fourteen percent indicated they never have, and others said they haven’t yet because their advisers are newly-hired.  

Verbatim  

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An odious process…but necessary.  

Regardless of the asset size of the plan, having an outside advisor is really important, especially now with the fee disclosure requirements. When the new advisor started, he re-negotiated the fees with our adminstrator and it was the largest fee reduction in his career! Participants had been paying commercial fees v. institutional fees for years.  

It kind of hard to benchmark our advisors on fund performance when we subscribe to the index mentality. Luckily our company has a philosophy that 401(k) investors have enough risk to accumulating sufficient retirement assets from 1) the market and 2) fund expenses (low cost index), that all other plan expenses are paid for by the company. Therefore advisor expenses are not adversely affecting plan participants.  

We benchmark fees compared with similar advisers who service plans our size. We request bids in the form of a flat fee, rather than basis points. 

Administration June 22, 2012

State Pension Funding Levels Recovering

June 22, 2012 (PLANSPONSOR.com) - U.S. states' pension funded levels are gradually recovering from their fall in 2010, according to Standard & Poor's Ratings Services' annual survey.
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The survey report, “The Decline in U.S. States’ Pension Funding Decelerates, But Reform And Reporting Issues Loom Large,” says the rate of decline has decelerated, and in some cases, pension funded levels are gradually improving. Still, municipal market participants are looking to improve pension plan reporting and disclosure.

The report found that stakeholders are increasingly interested in pension plan overhaul, spotlighting government pension liabilities. According to John Sugden, a credit analyst at Standard & Poor’s, the “active debate over reform and reporting [has led to] a more significant focus on pension reform, with an emphasis on sustainability, than we have observed in more than 20 years.”

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The plans included in the survey receive at least some of their funding from the states, and generally are reported within the states’ financial disclosure. Portions of the pension liabilities are funded by local governments and other governmental entities and are not direct obligations of the states.

The report is available to subscribers of RatingsDirect on the Global Credit Portal, or may be purchased by calling (212) 438-7280 or sending an e-mail to research_request@standardandpoors.com.

 

– Sara Kelly 

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