The Baldwin Insurance Group Inc.
09/16/2024 | Press release | Distributed by Public on 09/17/2024 00:17
Take Time Now to Conduct a Fee Equalization
Fees in defined contribution (DC) plans can be complicated. Historically, fees have not been fully and simply disclosed, but the industry continues to move towards creating reader-friendly disclosures.
Simply put, there are two basic types of fees: administrative and investment related. The investment-related fees are deducted from earnings on participant accounts and will vary from one investment to the next. These fees are paid to the firms that are making decisions about how the various funds are invested in the market. Participants will pay different investment-related fees, as the fees are based on where the participant chooses to invest their assets.
Administrative fees are also deducted from participant accounts. If the plan has not implemented a fee equalization (also known as fee levelization), administrative fees will also vary from one investment to the next. Administrative fees are designed to pay for administrative-related activities associated with participant account recordkeeping services. Such activities can include marketing, statements, education, processing contributions and withdrawals, issuing required tax forms, and meetings with local representatives.
Fee equalization addresses the equity of the administrative fees being charged to participants. Unlike the duties associated with investment management, duties associated with administering participant accounts do not change depending on where a participant has directed his or her investments. Arguments can easily be made that administrative fees should be the same for all participants because they have the same recordkeeping requirements. In our experience, regardless of investment selection, account value, or contribution level - the administrative duties are equal for all participants, so the administrative fees should also be equal.
Plan sponsors should consider a fee equalization structure in their plans. This structure allows participants to share equally in the cost of administering this important benefit.
This communication is for informational purposes only and does not purport to be a complete statement of all material facts related to any company, industry or security mentioned. The information provided while not guaranteed to accuracy or completeness has been obtained from sources believed to be reliable. The opinions expressed reflect our judgment now and are subject to change without notice and may or may not be updated. FSC.2024.25
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This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an "as is" basis, without warranty of any kind. The Baldwin Insurance Group Holdings, LLC ("The Baldwin Group"), its affiliates, and subsidiaries do not guarantee that this information is, or can be relied on for, compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability. This publication is not intended to be legal, underwriting, or any other type of professional advice. The Baldwin Group does not guarantee any particular outcome and makes no commitment to update any information herein or remove any items that are no longer accurate or complete. Furthermore, The Baldwin Group does not assume any liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Persons requiring advice should always consult an independent adviser.