Principal Financial Group Offers Fee-Policy Statement

Principal Financial Group has released a sample fee policy statement to help plan sponsors and advisers get a better grasp of the fee structure surrounding retirement plans.

“Recent regulations and fee litigation have certainly raised awareness of the need to closely monitor fees and services,” says Greg Burrows, senior vice president of retirement and income solutions at Principal. “While there are many ways to go about that, we think using a fee policy statement helps simplify and streamline the documentation process.”

Under the Employee Retirement Income Security Act (ERISA), plan fiduciaries must consider the interests of different participant classes and determine how any fee allocation method would affect them, while also acting prudently. The Department of Labor (DOL)’s Conflict of Interest rule or fiduciary rule is expected to extend the role of fiduciary to some in the greater financial-services industry who were previously unaffected.

With its fee policy statement, Principal intends to offer guidelines presenting fee evaluation as a documented process that can zero in on how fees affect individual participants along with a rational basis for the chosen approach.

“Plan fiduciaries should fulfill their responsibilities prudently—and have something to show for it,” says Steve Saxon of Groom Law Group, who consulted with Principal on the sample statement. “A properly drafted fee policy statement is a valuable resource to help reflect the process for evaluating fees and expenses and show that the plan fiduciary understands their responsibilities.”

For example, a fee policy statement could cover: The plan’s purpose, fiduciary duties relating to the plan’s payment of fees and monitoring and evaluating whether fees are reasonable, including how and when fees will be reviewed. It could also analyze fee collection methods and how they are evaluated, as well as communicating fees to participants.

“Plan sponsors often look to their advisers for expertise in managing fees and services,” says Burrows. “Helping them create a fee policy statement is an opportunity for advisors to further demonstrate their fiduciary support.”

Additional resources to help advisors strengthen client relationships and optimize their practice are available at principal.com/valueadd. For more research, analysis and insights from Principal, visit the Principal Knowledge Center.