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401k Plan Fees Should be Monitored Closely

401k Plan Fees Should be Monitored Closely

401k plan fees need to be monitored so plan fiduciaries can be certain that all fees are reasonable.  This means not only keeping a watchful eye on the aggregate amount paid but also monitoring the method for calculating the fees.  At the conclusion of a Plan Sponsor University (TPSU) Fiduciary Education Program held at the Wake Forest University in Charlotte, NC, TPSU Founder, and CEO, Fred Barstein spoke with TPSU program attendee, Maritza, Director of Human Resources at her firm.  Maritza’s firm has approximately 25 employees and the company has recently negotiated a lower fee structure for their 401k plan services.  See how Maritza and her firm successfully negotiated a reduced flat-fee pricing structure for their 401k plan fees.

Full Transcript Here

Fred Barstein:
This is Fred Barstein with 401k TV, just completed TPSU program at Wake Forest’s campus in downtown Charlotte and I am here with Maritza.

Maritza:
Correct.

Fred Barstein:
I got it right. Okay. Welcome, Maritza.

Maritza:
Thank you.

Fred Barstein:
Okay if we ask you a few questions?

Maritza:
Sure.

Fred Barstein:
Okay, great. Before we do, tell us a little bit about yourselves and the size of your organization.

Maritza:
Okay. Again, my name is Maritza. I am the Director of Human Resources for an organization that’s about 25 individuals.

Fred Barstein:
Right, so you are the smallest group here?

Maritza:
Yes, I claim that flag.

Fred Barstein:
Maritza was also the spokesperson for her group. One of the things you brought up, which I really applauded you for, was that you are now going to a flat fee payment versus asset-based payment.

Maritza:
Correct.

Fred Barstein:
Is that with your record keeper, advisor, both?

Maritza:
It’s actually with both.

Fred Barstein:
Both. Okay. Why’d you do that?

Maritza:
Well, in my prior lives, I’ve joined my organization as of January in this year, but in my prior experience I’ve gone through really reviewing the fee structure of our both record-keeper and our financial advisor and that was one of the things that I set my mind to once I joined the organization. And in doing so, I realized that based on our size and the current assets that we were paying more than our fair share in terms of fee.

Fred Barstein:
And flat fee made more sense to you why?

Maritza:
A flat fee made more sense to me twofold. One, obviously we were able to negotiate better terms for the organization and in turn that translates to the associates in terms of fees that they have to pay. And also it just helped in terms of making sure that all of us were on the same level playing field as it came to investment philosophy, making sure that we were there as fiduciaries doing what we were responsible for. And that’s to safeguard the plan as well as the plan participants.

Fred Barstein:
Right. Because with asset-based fees, if the market goes up or the contributions-

Maritza:
We’re subject to the ups and downs and trips and tribulations.

Fred Barstein:
This way you know what you’re paying.

Maritza:
It’s steady. It’s Steady Eddie. Slow and steady wins the race.

Fred Barstein:
I congratulate you for that.

Maritza:
Thank you.

Fred Barstein:
I think that’s where the market is moving but not so much with smaller companies so that’s great. Final question, a couple of things you learned that you might want to take back.

Maritza:
I think the overall opportunity and education session was great. I would say one of the key things that I learned was in regards to really making sure that our fiduciary, our plan committee members are trained, making sure that that training is not only consistent but that it’s ongoing. And I shudder to think the last time that the group actually went through if any, fiduciary training so making sure that’s implemented as well will be one of my first things once I get back to the office.

Fred Barstein:
Well, good. We have a new program for you, Trace, that you can use to do that.

Maritza:
Thank you very much. I’ll be looking at 401k TV.

Fred Barstein:
Very good. Well, thank you for your time today and thank you for watching 401k TV. Stay tuned.

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