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Fees Tag

November 22, 2021 In 401(k), 403(b), Asset Based Fees, Fees, Fiduciary

Revenue sharing is on the decline, as it should be.

The use of revenue sharing in retirement plans is on the decline, and this is a good thing. Plan sponsor surveys by both Callan and the Plan Sponsor Council of America highlight the decline in use of revenue sharing from over 21% of plans to about 15% in 2019. However, revenue sharing still runs rampant in smaller 401(k)s, and among 403(b) plans. Revenue sharing is an additional cost, tacked onto the expense ratio of a mutual fund or insurance product to pay for (typically) either the advisor’s services (aka 12(b)(1)s) and/or recordkeeping services (sub TAs). It ranges between 5 and 75 basis points and basically represents indirect and sub-surface payments from one service provider to another. The model is fraught with problems. For example: Uneven revenue sharing among different funds in a given plan means that some participants are paying more (in the form of a higher expense ratio) than others for the same service. Poorly disclosed revenue sharing leaves participants and many plan sponsors in the dark about what they’re paying. Indeed as many as 30% of plan sponsors admitted to not knowing if revenue share agreements were in force. Given all the recent fee litigation, sponsors should want to know, and advisors should

September 23, 2020 In Advisors, Fees, Fiduciary, Lawsuits

Avoiding ERISA Lawsuits Isn’t Hard

Proposed class action lawsuits by retirement plan participants against their own employers are on track for a fivefold increase between last year and this year, according to a Bloomberg Law analysis. Sixty-five class action suits have been filed so far in 2020 and many of these suits are for excessive fees and/or the use of overpriced share classes. Several employers have been sued multiple times (e.g. Quest Diagnostics, Cerner Corp, Omnicom Group). Startlingly, some of the employers are large money management and plan recordkeeping firms (e.g. INVESCO, Goldman Sachs, BlackRock, Mutual of Omaha, Fidelity – multiple times). Talk about a fox guarding the hen house!Moreover, these lawsuits are being brought against smaller plans (e.g. Greystar Management Services - $188M plan) and to other participant driven plans like 403(b)s (e.g. Mercy Health, University of Miami). After all, ERISA and the duty to pay only reasonable fees applies equally to qualified plans of all sizes and flavors. Sure, many of these lawsuits can be explained by the fact that the case law is maturing (providing a blue print for action) and that participants are more knowledgeable and attuned to fees now that the expense curtain has been pulled back somewhat. Today, there

June 26, 2018 In Actuarial Services, Articles, Fees, NWPS News, Pension Plans, Plan Design

Actuarial Services Need Not be a Black Box

A defined benefit (DB) or cash balance (CB) plan is more than just an employee benefit.  Properly structured, a DB or CB plan can be an elegant tool to help manage cash flow, maximize profitability, and super charge the retirement accounts of key employees and business owners. For many advisors and indeed even for most plan sponsors, the actuarial services for a DB or CB plan remain a mystery, in a black box somewhere.  It appears that actuarial service providers have taken their eye off the ball for all but the largest of clients.  Often, the only time a client hears from their service provider is when the annual funding notice comes detailing the amount that must be contributed to the plan. That’s not the way Northwest Plan Service (NWPS) operates. We open the black box to explain how the calculations are constructed and how to use the plan to meet business objectives.  With the client’s long term goals in mind, NWPS can develop a multi-year funding strategy that best meets the goals for cash flow, balance sheet considerations, maximizing tax-deferrals and minimizing PBGC premiums.  We carefully monitor the plan and the rate of accrual for benefits.  We’ll then provide a quarterly scorecard