Retirement Plan Benchmarking: An Apples to Apples Approach

Defined contribution and defined benefit plans are extremely complex, which has led to an industry devoted solely to administering and ensuring the proper compliance of these plans. As a general rule, the more customized a plan becomes, the more expensive it becomes to administer. And to be clear, there’s nothing wrong with having a highly customizable plan, as it typically is designed to meet the Plan Sponsor’s specific needs.

However, when engaging a benchmarking study to determine the reasonableness of plan fees, highly customized retirement plans create significant noise in the benchmarking analysis. In other words, comparing the fees of a Safe Harbor 401(k) plan and ESOP plan provides little value for the Plan Sponsor.

As mentioned, benchmarking plans with a similar plan design is essential to creating a useful benchmarking study. Similar plan design is just the tip of the ice berg, and any meaningful benchmarking study will select a benchmarking peer group using multiple criteria to ensure that the fee comparisons between plans employ a fair, “apples to apples approach”.

Beyond plan design, the most meaningful criteria used to select a benchmarking peer group are:

• Total Net Assets
• Total Participants

Why Total Net Assets?

Investment management fees, which typically encompass the majority of the plan’s fees, are often charged as a percent of Total Net Assets. Furthermore, these fees are generally charged as a lesser percent as Total Net Assets increase.

Why Total Participants?

Recordkeeping fees are typically charged on a per participant basis (e.g. $15/participant) and generally are the next highest fee to the plan after investment management expenses.


Any benchmarking study that does not employ the necessary level of analysis in selecting a benchmarking peer group will be very misleading and provide the Plan Sponsor with little to no ability to determine the reasonableness of plan fees.


Please contact Mike Bourne at 858-673-3690 x109 to further understanding and discuss benchmarking your retirement plan. Atessa will be happy to provide a complimentary “total plan fee” estimate based on your plan’s publicly available fee disclosures on Form 5500.

Atessa Benefits

By |2018-07-03T00:18:39+00:00July 27th, 2012|Atéssa Blog|1 Comment

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