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Data & Research June 21, 2012
Plan Value Not About Fees Only
Benchmarking services are emerging that can compare
the suite of retirement plan services against costs to plans of similar size
and complexity.
Reported by Rebecca Moore
However, this still does not answer the basic question about the true value proposition of a defined contribution (DC) plan, a report contends.
The report, issued by Unified Trust Company, says a “successful retirement” is the the key metric to measure value of defined contribution plans. Successful retirement can be measured on an actuarial basis and can then be used to calculate the cost/benefit of each defined contribution plan. In the report is a method to follow.
Successful small plans with good cost/benefit ratios will, on average, have total annual costs of $600 to $1,100 for each successful participant; successful midsize plans will, on average, have total annual costs of $500 to $900 for each successful participant; and successful large plans will on average have total annual costs of $400 to $750 for each successful participant, the report suggests.
“In 2012, the upcoming 408(b)(2) plan sponsor fee disclosures and 404(a) participant disclosures are going to create a whole new discussion with plan sponsors. The discussion cannot be about fees only. It is also important to benchmark fees, services and outcomes. This fee discussion will make the delivery of tangible value of huge importance,” concluded Dr. Gregory W. Kasten, author of the report.
The report is here.