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Consulting giant produces “Seven Little Pages of Retirement Plan Wisdom.” It is a must read.

Greg Carpenter

December 29, 2022



Consulting giant Mercer LLC has produced an amazing little document. In just seven pages (!) it provides plan sponsors with a clear, concise guide to meeting fiduciary responsibilities – fees, benchmarking, documentation. It even explains (I am swooning) “bundling” and “revenue sharing.” The writing is clear, concise and accessible. It will take you 15 minutes to read it.

I think you will want to print it, save and share it. Here’s the link to the download:

This piece is a “Point of View” and I agree with every point made. And the points made are equally valid for large 401(k) plans and small business 401(k) plans. Here are my big three:

Price administrative fee on a per-participant basis, independent of the investment structure. These fees are transparent and provide a basis for documenting the fiduciary standard for reasonable fees.

Benchmark and negotiate recordkeeping and investment fees separately. Don’t bundle services. If you do use proprietary investments of the recordkeeper, negotiate a provision to keep reduced fees even if you move away from the investments for under-performance. This point is particularly important for a small business 401(k) plan – most vendors will initially offered a bundled service option.

Negotiate vendor contracts with standards and vendor liability in the best interests of plan participants, with vendor accountability. Vendor responsibilities should be in writing in a contract. Vendors should be contractually responsible for any negligent breach, with remedies spelled out.

As a plan sponsor, if you follow through on just these three recommendations, you will have created a superior retirement plan for your employees.

Here is the cherry on the sundae.

Page 5 provides the clearest, most understandable analysis of the allocation of shared plan fee among participants. It makes the case for “per-participant” fee allocation, even in the face of the siren song of asset-based fee allocation. You may have been unable to understand the arguments before this paper - this analysis should make it clear for you.

Kudos and thanks to the folks at Mercer for this cogent and straightforward paean to frugality! Please share this blog and the Mercer paper.

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