Reducing plan fees is top of mind for sponsors. Growing numbers of large plan sponsors are feeling the pressure of rising retirement plan costs. That’s according to a recent Cogent Syndicated retirement report from Escalent, which found that reducing retirement plan costs is a core focus for 50% of defined contribution plan sponsors with more than $100 million in plan assets. That’s up 35% from the prior survey in 2021, and the study’s lead researcher, Sonia Davis, observed that the increase is due to increases in cost pressure and a focus on better provider performance.
Escalent’s latest Retirement Planscape report, cited in a recent planadviser article, found that 19% of plan sponsors were “not at all confident” in the stability of the global economy, up 12% from 2021. Additionally, plan sponsors identified benchmarking their retirement plan as their biggest pain point, according to the study.
The results show that plan sponsors want more support from retirement plan providers and intermediaries to understand what’s happening with their plans and make informed decisions that are in the best interests of their participants. Additionally, retirement plan committees are undergoing more scrutiny from executive committees, which includes a need to define and explain costs and administration of current plans. Financial advisors can deliver additional value by providing transparency and education for plan sponsors during regular plan meetings.
Some larger plan sponsors may issue requests for proposal (RFPs) to recordkeepers and third-party administrators (TPAs) to ensure their plans are competitive. Plan advisors can also assist with those RFPs.
The Escalent survey also found that plan sponsors have an increasing awareness of digital plan providers than before. Just 39% of plan sponsors were unaware of digital recordkeepers in the latest survey, vs. 52% last year. Plan sponsors were most attracted to digital recordkeepers due to better cost structures (43%), the survey found. Other aspects that plan sponsors found appealing were better digital capabilities (36%), easier participant onboarding (34%), better payroll integration (33%) and innovative technological platforms (31%).
Plan sponsors who are considering ways to cut plan costs have an opportunity to consult with their advisors and providers to determine if their fees are competitive. Benchmarking best practices recommend re-evaluating retirement plan providers at least every one to three years. With the help of plan advisors, plan sponsors can undertake benchmarking activities and/or issue requests for proposal when needed to ensure they are getting the most value from their plan providers and acting in the best interests of their participants.
