Do you benchmark your 401k plan on a regular basis? Have you ever taken time to benchmark your plan? Here’s why you should this year:
1. It’s free
More than likely your investment advisor can either create the benchmarking report himself/herself or can use a third party to get the report done for you without charge. The providers involved in the process (your recordkeeper, trustee, custodian and investment advisor) should not charge you to share the data from which the benchmarking report will be created.
2. It’s required
The Department of Labor expects you to monitor the costs of your 401k program. How can you determine the reasonableness of the fees you are paying without the ability to compare them to something? Using a benchmarking report allows you to view all of your fees in one convenient report and also compare them to market norms.
3. It’s educational
Most benchmarking reports, especially those produced by objective third party firms, do a nice job not only presenting and comparing your fees but also assessing things like plan complexity, participant success measures and participant fees. You will get more than just a look at employer fees when you review one of these reports.
4. It’s proper due diligence
Having a benchmarking report in your plan files is an excellent way of demonstrating effective due diligence. Should you ever be questioned about your diligence with regard to monitoring fees (via a lawsuit or audit) I can think of no better way of demonstrating compliance than a recent benchmarking report in your plan file.
5. It’s becoming standard practice to benchmark
Large plan sponsors now benchmark their plans each year. The retirement plan business, especially with regard to fees, has become incredibly dynamic. As a result, many plan sponsors feel reviewing an annual benchmarking report is time well-spent.
How often should you benchmark your 401k plan? Plan sponsors who have 401k plans with hundreds of employees or less should probably benchmark their plans every other year. Large plan sponsors, those with thousands of employees, should get into the habit of benchmarking their plans each year. Not sure how to start this process? Talk to your investment advisor.
Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton has over 30 years of retirement plan consulting and administration experience and has provided consulting services to many Fortune 500 companies including: Aon Hewitt, Apple Inc., AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Car Company, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs and many others. Mr. Lawton may be contacted at (414) 828-4015 or email@example.com.
Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Advisory (RIA) firm providing investment advisory, fiduciary compliance, employee education, vendor management and plan design services to 401(k) plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or firstname.lastname@example.org or visit the firm’s website at: http://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.