Managing 401(k) fees remains top plan sponsor concern

Callan survey suggests plan sponsors should consider indirect revenues in fee reviews

Managing plan fees is the main priority for corporate defined-contribution plan sponsors in 2020, according to the results of an annual survey by Callan, an institutional investment consulting firm.

For the fourth consecutive year, plan sponsors ranked reviewing plan fees as the most important step they took to improve their plan’s fiduciary position over the past year, the study found.

Conducted in the fall of 2019 by Callan, the survey of 114 plan sponsors — including Callan clients and other organizations — found participant communication closely followed fees as the top area of focus for 2020, with financial wellness ranking as the most important area within participant communication for the third consecutive year. 

Among other notable survey findings was that cybersecurity increased only slightly in priority from last year.

The survey found that 87% of plans offer a Roth feature, 93% offer a target-date fund, and 95% of plans offered some form of guidance or advisory service to participants. The prevalence of custom solutions increased modestly to 17.3% in 2019.

“What’s surprising is that over 45% of sponsors don’t evaluate indirect revenue as a part of their fee review,” said Jamie McAllister, a DC plan consultant at Callan. “Since indirect revenue from sources such as managed accounts or rollover assets can be meaningful, we feel it’s important that it be considered in the overall fee evaluation.”

[More: Lawsuits push 401(k) plan sponsors to cut fees]

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