PLANADVISER - Special November 2009

Measuring Up Fiduciary Benchmarks
Retirement plan benchmarks get more complicated, but how can an adviser
keep up, and why should he integrate plan comparisons in his practice?
Fiduciary
Benchmarks

From left: Tom Kmak, Fred Reish, and Barbara Delaney

Determining how a retirement plan program stood up against

competitors used to be as simple as determining whether or

not people participated. However, as the defined contribution

industry has matured, so has the number of benchmarks by

which the industry measures plans; now a solid benchmarking

process can include participation rates, deferral rates, how

participants invest and preserve their retirement balances as

well as individual wage replacement ratios. For sponsors, it now

includes the services they receive as well as the fees and expenses

they pay. As the defined contribution world continues to be under

the microscope, proving that you add value for your retirement

plans will become increasingly important. PLANADVISER spoke

with Tom Kmak, CEO of Fiduciary Benchmarks; Fred Reish,

noted ERISA attorney and Managing Director at law firm Reish &

Reicher; and adviser Barbara Delaney of StoneStreet Equity about

the value in benchmarking retirement plan programs, for both the

plan sponsor and adviser.

PA: What are some of the fee issues being raised in the courts right now?

Reish: The single greatest concen tration of litigation is over revenue sharing and, within revenue sharing, the compensation that recordkeepers are getting from the plan investments. Essentially, the claims are that, in their role as fiduciaries, the plan spon sors did not understand or were not even aware that the revenue sharing was being paid, did not understand the purpose of it, and did not eval uate those fees in a prudent process whether it was reasonable or relative to the services being provided. The only way to evaluate them is through gathering external data through, for example, an RFP process or a bench marking service like Fiduciary Bench marks.

PA: Fee disclosure, transparency, reasonableness, and value are all words that have been thrown around in relation to 401(k) plans, but what are the relationships among those four words?