Now that fee disclosures are being delivered to employers and participants each year, how do you fulfill your fiduciary duty to determine the reasonableness of plan fees and communicate the information to employees? An effective way is with a documented fee review process. Check out our presentation from a recent learning symposium for plan fiduciaries.

1. LPL Financial Member FINRA/SIPC
1Member FINRA/SIPC
Leveraging fee disclosures to your advantage
YOU HAVE THE DISCLOSURES -
NOW WHAT?
For plan sponsor use only. Not for use with participants or the general public.

2. LPL Financial Member FINRA/SIPC
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AGENDA
 Fee related industry trends emerging
 6 steps for creating a fee review process
 Benefits of a team approach
 A call to action

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SEARCH FOR REASONABLENESS
“Reasonable”
compensation not
clearly defined by
ERISA
Plan sponsors
on quest to
determine
reasonableness
of plan fees
New
industry
trends
emerging

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INDUSTRY TRENDS -
Fee
Compression
 Between 2009 and 2012 declined 10 basis points (bps)*
 Costs continue to narrow each year
* Source: 2014 BrightScope and the Investment Company Institute (ICI) report, “A Close Look at 401(k) Plans”

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INDUSTRY TRENDS
More RFPs
 40% of plan sponsors likely to do review this year
 11% of plan sponsors are already planning to switch providers
Source: 2014 Retirement Planscape® by Cogent Reports™

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INDUSTRY TRENDS
Benchmarking
 Over 90% of plan sponsors will benchmark their retirement plan this year
PLANSPONSOR magazine, February 2015, “Plan Benchmarking Measures”

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ARE YOUR PLAN FEES REASONABLE?
Make that determination using a fee
review process
 Leverage disclosures in your fee
review process

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SIX STEPS FOR CREATING A FEE REVIEW PROCESS
1. Formalize
your fee policy
2. Take Inventory 3. Evaluate
4. Benchmark 5. Prepare for
participant inquiries
6. Document

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STEP 1: FORMALIZE YOUR FEE POLICY
Documents reasoning and methodology used for fee-related
decisions in your plan
Benefits of a fee policy:
 Helps maintain consistency for future committee members
 Can help control plan costs
 Shows fiduciary prudence and due diligence

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CUSTOMIZE YOUR FEE POLICY
Fee reasoning
 How did you arrive at your plan fee structure?
 How are fee-related decisions documented?
Fee methodology
 How do fees impact participants accounts?
 How are plan service providers paid?
 How is plan revenue sharing managed?
 How do plan fee offsets work?
Participant fee communication process
 What’s your participant inquiry process?
 What type of information and follow-up do you provide?

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STEP 2: TAKE INVENTORY
 Ensure you have all disclosures
from covered service providers
listing services and fees
 Investigate whether you have
received all the services listed
 Identify any discrepancies or
conflicts of interest

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TAKE STOCK
 Understand any investment-related fees
participants pay
 Familiarize yourself with all direct and indirect
fees arrangements and compensation
 Document any action items necessary and
timeframe for resolution

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STEP 3: EVALUATE
Services List
 Plan Administration
& Recordkeeping
 Investment
Management
 Individual Participant
Communication
& Education
 Consultant/Advisory
 Audit/Legal
 Trust/Custody
Stakeholders
 Plan Sponsor
 Employees
Payment Methods
 Billed
 Deducted
 Investment Expense
Total Value Received Total Cost
Evaluate Reasonableness
Service Providers
 Recordkeeper
 Third Party
Administrator
 Investment Advisor
 Benefits Consultant
 Actuary
 CPA/Attorney
 Trustee

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STEP 4: BENCHMARK
 Create a benchmarking strategy
using both quantitative and
qualitative data
 Determine benchmarking:
− Sources
− Frequency

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COMMON BENCHMARK CRITERIA
Examples
 Investments and investment expenses
 Administrative expenses
 Participation rate
 Contribution rates
 Maximizing company match
 Utilization of goal-setting tools
 Participants on track to replacing required income level in retirement
 Participant investment diversification
 Effectiveness of educational material and participant website

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MOST POPULAR BENCHMARKS
100%
Investment
Expenses
Plan Sponsors that benchmark
their plan once per year.
91.7%
Average
Participation
Rate
91.7%
Administrative
Expenses
83%
Average
Deferral
Percentage
58%
Participant
Diversification
91.7%
PLANSPONSOR magazine, February 2015, “Plan Benchmarking Measures”

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BENCHMARKING CHAIN AND FREQUENCY
Benchmarking Frequency
General rule of thumb:
 100 employees or less:
every 2–3 years
 101–1000+ employees:
every 1–2 years
Disclosure
Transparency
ReasonablenessValue
Documentation
Benchmarking Chain

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STEP 5: PREPARE FOR PARTICIPANT INQUIRIES
 Designate responder(s)
 Create materials and
prepare responses
 Develop a system to deliver
the information
 Formalize a follow-up process
 Provide ongoing education

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STEP 6: DOCUMENT
 Sample fee review process
material found in a due diligence
file
 A fee review process shows that
prudence and due diligence was
used when fulfilling your fiduciary
duty of determining the
reasonableness of plan fees.
Fee Review Process
Documentation
 Fee Policy
 All services and fees
 Evaluation process
 Benchmarking report
 Participant inquiry process

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CONSIDER A TEAM APPROACH
Plan Sponsor
 Determines
reasonableness of
plan fees
Fiduciary
Duty
Satisfied
Experienced LPL Financial Advisor
 Helps ensure plan sponsors get all disclosure
information on a regular basis
 Helps plan sponsor understand the fee
disclosure data
 Helps create fee review process
 Helps plan sponsor prepare information to
help with participant inquiries
+ =

21. LPL Financial Member FINRA/SIPC
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LPL Financial Member FINRA/SIPC
A call to action:
Leverage disclosures to your advantage
- create and follow a fee review process

22. LPL Financial Member FINRA/SIPC
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LPL Financial Member FINRA/SIPC
Thank You
Contact Information
Brady Dall
401k Advisors Intermountain
Tel: 801-559-7774
Cell: 801-699-7707
Email: brady@401kaim.com
www.401kaim.com
To the extent you are receiving investment advice from a separately registered independent investment
advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such
entity. This information was developed as a general guide to educate plan sponsors, but is not intended as
authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult
your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by
using the information provided, plan sponsor will be in compliance with ERISA regulations. For Plan Sponsor
Use Only - Not for Use with Participants or the General Public.
RP-0188-0415
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