Analyze my Plan

What is the cost of participating in the plan? Carefully examine funds fees and provider asset costs. Evaluating these costs against those from alternate providers. Measure both the primary tangible plan expenses (investment expenses), and the optional plan expenses relating to special design (self-directed brokerage), consulting and voluntary participant expenses/fees, cost for any fiduciary services or protection, as well as the cost of the plan broker or advisor. When assessing the investment options make this a performance-first analysis. Examine how the funds in a category perform, and then select the ones with the lowest cost.

Assessing the investment elements of a provider’s lineup measures both the availability of options as well as the performance of those options. Investment choice and flexibility are important considerations. How many funds are permitted in your plan and how does the provider help you build the right fund lineup? Since most retirement plan providers offer hundreds of fund options to choose from, pay special attention to the following:

• Are there proprietary fund requirements? If so, how does that suit the unique objectives of your plan? Not all providers have proprietary fund requirements but based on your plan’s size there may be limitations on how much “open architecture” may be available.
• Are index funds readily available? These funds are important for a lineup because they have extremely low fees and are passively managed, providing a complimentary alternative to actively managed funds.
• What kind of Lifestyle fund options exist? There are many risk-managed funds available (considered fund-of-funds) and these funds may be important for employees looking to ensure their investments lineup with a particular risk profile.
• What fixed account options are offered? It is not uncommon for employees to have balances in the fixed account or money market fund option.
• What Target Date funds options are available? A target date fund adjusts its investment mix to become more conservative as the target retirement date approaches. They are an important consideration since target date retirement funds are an important consideration since these funds are widely utilized by employees. Assessing these funds can be difficult, as not all have sufficient historical performance to measure.  Additionally, there are distinct varying philosophies between providers to understand whether funds are managed “to” versus “through” retirement.
• What share classes are available? Most providers offer more than one share class of funds, and underlying costs can vary between them depending on the advisor you work with and the size of your plan, it is important to determine what share class is available so you can select funds with low underlying expenses.

A Plan Administrator’s job is to provide dedicated support services to make plan administration easier. This begins with understanding if your Plan Administration is “bundled” and being performed by the Plan Provider for a fee that is usually added to participant costs, or “unbundled” and performed by a separate company from the plan provider. While plans built as bundled plans offer the appearance of convenience, there is a growing amount of rationale supporting having this function provided by a separate company specializing in plan administration (unbundled). When evaluating a TPA you should first look for a high level of quality service. Annual plan testing and administration deals with the regulatory elements of a retirement plan, so working with a firm that makes this experience as easy as possible is important. Secondly, having the plan administration performed at a low or reasonable cost is essential. The market for Third Party Administrators is considerably larger than the market for Plan providers, and this works to your advantage because it compresses the cost range considerably. This is not about buying cheap, because you usually get what you pay for. It is about finding value at a reasonable price.