George Cones, JD

Matilda,

There are much better options for smaller plans than there were just a few years ago.

I would suggest you look for a fee-only advisor, who can hopefully show you how to build a plan using "unbundled" service providers. That means, the record keeper is separate from the custodian, and the advisor is separate from them both.

Depending on the assets in the plan, you may find that you can have a plan with significant number of choices, using a combination of index ETF's and/or best-in-class active managers.

Juanita,

You may find it difficult to go to the "big guys" because they require a pretty sizable asset base to take you on. There are Third Party Administrators (commonly referred to as TPAs that may be your best bet). Many of these TPAs work with Advisors, like the those you find on the Brightscope website. Try to find an Advisor that is fee only, and will accept fiduciary status as a ERISA Section 3(38) fiduciary or at the very least a Section 3(21)(A) fiduciary.

Good question. This is not legal advice, so if you have legal questions seek out an ERISA attorney.

To begin to understand plan costs and service quality, you should begin here on BrightScope. Look at a few plans, enter your plans information, and see how you stack up.

You can find a great study which focuses on “all in” plan cost at the following website:

        http://www.idc.org/pdf/rpt_09_dc_401k_fee_study.pdf

In addition, James P. Dowd, CFA, who is contributor to this site has offered a benchmark study to other questioners, which I am sure he would provide if you get in touch with him.

Sandy, from you question, I assume you are a trustee or administrator of a 401(k) plan or 403(b) plan.

In order to learn how to protect yourself in your role as a fiduciary , it it is important to understand that there are different types of fiduciaries under ERISA. There are Administrators and Trustees Section 402(a)(2) fiduciaries, Section 3(38) Investment Advisor Fiduciaries, and Section 3(21)(A) functional fiduciaries, such as a person or entity that:

  –  has discretion or control over plan assets
  – renders investment advice for a fee
  – has discretion over plan administration

Please seek to establish in writing what the service provider’s fiduciary responsibilities are.

Under the new 408(b)(2) regulations you will have a duty to ferret out all of the costs and potential conflicts of interest. The final regulations create potential liability for Covered Services Providers (CSPs) and Responsible Plan Fiduciaries (RPFs).

These regulations were implemented because many participants and plan sponsors (employers) have no idea how much they are paying for services.

There are several layers of fees on relating to the investments, such as:

•   Sub TA Fees (sub transfer agent fees)
 •  12(b)(1) Fees
 •  Load Fees (Front-end and Back-End)
 •  Expense Ratios:  Mutual Fund and Exchange Traded Fund (ETF) Internal Management Expenses 
 •  Redemption Fees
 •  Exchange Fees
 •  Account Fees
 •  Soft-Dollars – 28(e) Safe-Harbor
 •  Unitized Variable Annuity Wrap Fees

Some of these fees are easier to find than others.

One place to begin is to look at the share classes in the plan. Get the prospectus for each plan choice. There you will find the various share classes. If you are using the institutional share class, great, if not see what the difference in costs is and ask questions, about load fees, contingent deferred sales charges, redemption fees, 12(b)(1) fees and Sub-TA fees.

A more detailed discussion of share classes can be found om my BrightScope page at:

http://www.brightscope.com/financial-planning/advice/guide/2768/How-Different-Mutual-Fund-Share-Classes-Affect-Your-Retirment-Plan-Or-Investment-Portfolio/

Another level of fees, relating to investments are custodial fees, transaction fees, and any number of account fees. You may have to ask a lot of questions to understand the fees and expenses. Remember you are the client, and they have a duty to provide you with the information.

It would be wise to document any attempt to get information from your service providers and their responses to your requests, since you may be held accountable for their failure to provide the information later.