Assessing Retirement Plan Value - 8b

1.68%
0.67%
1.27%
27%
2%
7%
%
0.36%
1.68%
1.61%
7%
1.23%
0.21%
1.17%
27%
1.2 %1.61%
1.68%
0.58%
0.87%
1.2 %27%
NUMBER
>MORE THAN A
2.27%0.83% 0.78%
1.27%
0.21%
1.68%
1.27%
0.21%
0.47%
1.68%
1.68% 0.68%
0.87%
1.68%
1.27%
0.58%
1.68%
0.27%
2.27%
07
0.230%8%.58%
0.58%
2.27%
0.27%
0.78%
0.78%
1.68%
0.58%
0.72%
0.78%
0.58%
1.27%
1.68%
1.27%
1.68%
1.27%
1.68%
1.68% 0.83%
1.68%
2.27%
2.13%
1.68%
0.32%
2.27%
2.13%
2.13%
Fixed Rate Product Fees
NAVIGATING COST CONSIDERATIONS
When comparing total plan fees of service providers, it’s
important to know how fixed rate or guaranteed interest
options may impact the evaluation.
WHAT DOES IT MEAN?
UNDERSTANDING
RETIREMENT PLAN COSTS
Guaranteed interest options do not have expense ratios,
however there are expense assumptions underlying the
calculation of each guarantee and this may include amounts
that are paid as revenue sharing to the service provider, and
applied to pay for recordkeeping and administrative services.
REVIEWING PLAN SERVICES
Many service providers will provide a total cost analysis that
includes a calculation of the “weighted total investment expense”
for the plan. This calculation takes into account the amount of
plan assets that are invested in each investment option.
NAVIGATING
COST CONSIDERATIONS
Guaranteed Interest Option Expense Examples
EVALUATING
REASONABLENESS
ADDRESSING
PARTICIPANT QUESTIONS
GLOSSARY OF TERMS
Investment Advisor Investment Option
ABC Investment Advisor
Bond Investment Option
ABC Investment Advisor Large Cap Stock Investment Option
ABC Investment Advisor Small Cap Stock Investment Option
ABC Investment Advisor
Weighted Average Revenue Sharing (%)
Weighted Average Investment Expense (%)
This example is for illustrative purposes only.
MAIN
TOOLS & RESOURCES
> BACK TO HOME
TOTAL COST
COLLECTION
METHOD
PASSIVE VS.ACTIVE
FIXED RATE FEES
ERISA BUDGET
MORE THAN A NUMBER • NAVIGATING COST CONSIDERATIONS | 8
Revenue
$
Invested
International Stock Investment Option
Guaranteed Investment Option
$2,000,000
$2,000,000
$2,000,000
$2,000,000
$2,000,000
%
Invested
20%
20%
20%
20%
20%
Sharing Paid
to Service
Provider
0.35%
0.15%
0.50%
0.55%
0.50%
0.41%
Example 1 Example 2
Total Investment
Expense
(Expense Ratio)
0.95%
0.50%
1.15%
1.30%
0.50%
0.89%
0.95%
0.50%
1.15%
1.30%
0.00%
0.79%
The guaranteed interest investment expenses may or may not be
disclosed as part of the weighted total investment expense and
total cost analysis, depending on the practices of the service
provider. A provider may show a fee for the guaranteed interest
option in a separate section of the fee illustration. There is
generally no standard or consistent approach among service
providers in how or if the fees are disclosed.
EXAMPLE 2
Shows there is no investment expense associated with the
guaranteed interest option, and therefore reflects a lower
weighted average investment expense for the plan and the
resulting total cost analysis. By including the assets invested
in the guaranteed interest option but not disclosing any
expense, the weighted average investment expense may not
represent all costs paid by the plan.
Below are examples of a guaranteed interest option
with the disclosure in the total investment expense
column and one without the disclosure in the total
investment expense column.
It may be prudent to ask the service provider what cost is associated
with the revenue sharing from the guaranteed interest option and
how that impacts the plan’s total cost. And, if another fixed rate or
stable value investment option were used in place of the guaranteed
interest option, would the plan’s total cost remain the same?
0.27%
RETIREMENT PLAN VALUE
Assessing Retirement Plan Value

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