How will service fees be paid in the future and how did the Task Force determine if fees were competitive and reasonable?
Fee transparency and hidden fees have recently made headlines in the press and are the basis of new federal legislation under discussion. For large plans like the University’s, it is not uncommon for participant fees to more than offset actual recordkeeping costs. Moreover, when fees are paid through an expense ratio or as a percentage of assets, individuals with larger balances pay more for recordkeeping services than individuals with smaller balances. For recordkeeping services, such as quarterly statements and the processing of transactions, a fixed per-participant fee, regardless of the account balance, makes more sense. Through the competitive bid process, service providers were asked to identify the services they would provide and the cost to participants. In the future, Fidelity will charge participants a flat annual fee for plan services, regardless of the number of funds a participant selects and the participant’s account balance.
Related Questions
- One of the Task Force goals is to ensure plan participants pay competitive fees for the investments and services provided. How are service fees paid today?
- How did the Task Force define sustainability and use that definition in planning for a sustainable future?
- How will the Task Force determine if fees are competitive and reasonable?
