“I'm surprised at what certain plan sponsors still don't know about their total fees,” said Pamela Hess, director of retirement research at Aon Hewitt, Lincolnshire, Ill. “A lot of sponsors don't know what they could get (in terms of services or reduced fees) because they don't ask for it. They don't always ask the right questions.”
The various surveys — covering large and small plans, 401(k) plans as well as 403(b) plans and other DC plans — illustrate that while plan executives express concern about participants' understanding of retirement investing, the executives themselves fall short, too.
A survey by Callan Associates, San Francisco, found a string of double-digit “don't-knows:” 13% about administrative fees for company stock; 37.5% how the crediting of excess revenue sharing works; and 16.1% if their plans offer ERISA expense reimbursement accounts.
A report on the survey, published in January, characterized as “alarming” the finding that 19.4% of respondents didn't know about the proportion of funds in their plans that pay revenue sharing.
The survey featured responses by treasury and human resources executives at 99 DC plans — about three-fourths were 401(k) plans — with aggregate assets exceeding $85 billion.
The results were “surprising,” said Lori Lucas, executive vice president and defined contribution practice leader at Callan. “There's a lack of certainty on how fees are paid.”
Although sponsors already receive a considerable amount of data about fees, “they don't necessarily seem to understand all of the data,” said Ms. Lucas. “In the past, sponsors asked their record keepers about fees, but it's in the record-keepers' interest to educate them in a certain way. Sponsors need a more objective, third-party source for unbiased information.”
Sometimes, the executives just throw up their hands in frustration. In August, Aon Hewitt published results of a survey of 435 DC plan executives, in which 28% said they “have not attempted to calculate total plan cost.”
Among those who didn't calculate plan costs, 51% cited complexity as the reason for inaction, the report said. Twenty-five percent said they couldn't obtain the data, and 23% said cost calculations were either a low priority or not attempted.