Evaluating Expenses of 401(k) and 403(b) Plans

This guide outlines the key steps that plan fiduciaries should focus on when evaluating the fees associated with retirement plan services, particularly in light of the Department of Labor’s final fee disclosure rules. The document emphasizes the importance of understanding all fees incurred by the plans, as many fees may not be immediately apparent. It details three essential steps: first, identifying and understanding all fees, including revenue sharing from investment portfolios; second, evaluating whether the fees are justified based on the level of services provided and considering leveraging the plan’s size to reduce expenses; and third, documenting the analysis and ensuring consistency with plan documents. The guide also notes that while ERISA does not mandate the lowest possible expenses, it requires fiduciaries to act prudently in the best interest of participants, necessitating ongoing monitoring and evaluation of plan expenses.