More than three-quarters of defined contribution plan executives are fully confident that investment fees and administrative costs associated with their 401(k) plans have been properly disclosed, according to a new survey by Mercer.
Mercer also found that of the 150 organizations surveyed via the Internet in June, 25% said their plan vendor has not disclosed the amount of annual revenue received from the plans investment managers to pay for administrative services. Nearly three-fourths (71%) said such revenue sharing is paid directly to the vendor, while 44% pay no explicit administrative fees.
Mercer considers it a best practice to determine administrative fees on a per-capita basis independent of the source of the revenue, Amy Reynolds, a Mercer principal and DC retirement plan consultant, said in a news release. However, plan sponsors that prefer to continue to utilize investment revenues to offset administrative expenses should next focus on attaining an equitable allocation of administrative cost across their participant population.
The Labor Department recently proposed a new rule that would require employers to report some of the plan fee information to plan participants on a regular basis. If finalized, the new rule would be effective for plan years beginning on or after Jan. 1, 2009.