At a TPSU (The Plan Sponsor University) program held at LaSalle University in Pennsylvania, the HR director of a large healthcare system going through a merger and plan consolidation discussed how providing greater fee transparency can lead to higher levels of satisfaction by employees participating in the company’s retirement plan and can increase engagement overall.
The organization, which has 5800 employees and three plans merging with another system that has 18,000 employees and 8 plans, decided to switch share classes to lower costs while providing greater fee transparency to plan participants. Though the changes were generally well received, even those employees that questioned the fees that started appearing on their statements were more satisfied with their company’s retirement plan because it was explained that fees were actually lower than before.
A significant percentage of employees in defined contribution (DC) like 401ks or 403bs think that their retirement plan is free because they don’t see the fees or write a check. Over a decade ago, it was common for DC record keepers to tell plan sponsors that their plan was free for the same reasons – with more awareness and the advent of fee disclosure rules like 408b2, plan sponsors realized that nothing is free. Participants are just waking up to that reality and, rather than “let sleeping dogs lie” and not show the fees to participants now required under 404a5 disclosure rules, informed participants get more engaged if they aware of how their company’s retirement plan works are likely to be more satisfied and better prepared for retirement.
Other key takeaways from the LaSalle TPSU program by this healthcare plan sponsors: read the plan documents; and revisit plan design. A key part of TPSU is providing practical action steps for each plan sponsor attending the program. These steps seem like sound advice for everyone.
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