US - Mercer Human Resource Consulting has recommended Defined Contribution (DC) plan sponsors take a proactive approach to new guidance regarding greater disclosure of plan fees and expenses.
The guidance is anticipated later this year, and although its exact content and timing is unknown, Mercer said the federal government had made increased disclosure a high priority.
Recent high-profile lawsuits alleged current fee disclosure was inadequate and participants lacked sufficient information to make well-informed investment decisions, according to Mercer.
Bill McClain, principal at Mercer, said given the topic’s high profile nature, companies would need to demonstrate the cost-effectiveness of fees paid by plans.
He said they should start by fully understanding their current fee and revenue sharing arrangements, including hard-dollar fees, asset-based fees and underlying expenses such as trading costs.
“By documenting fees from all sources and then benchmarking those fees against the current marketplace, plan sponsors often find they have a basis for negotiating reduced fees,” said McClain.
Commenting on Mercer’s recommendations, a UK pension analyst who asked not to be named, said: “From a client point of view there should be as much transparency as possible and I do not see this as any different. It is up to the plan sponsors to get the fund managers to provide that transparency.”
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