Plan Value Not About Fees Only (planadviser)

Benchmarking services are emerging that can compare the suite of retirement plan services against costs to plans of similar size and complexity. (via planadviser)

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.

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About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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