US - Defined contribution (DC) plan sponsors in the US lack vital knowledge about fees, according to a survey by Chatham Partners.
But, beneath the surface, only 58% of respondents felt confident about their understanding of their plan's overall costs, such as administration and investment fees, considering the importance of the task.
Howard Yata, managing director, Wilshire Consulting, said the reason for the discomfort was many of the DC plan sponsors responsible were human resources (HR) professionals, not financial or treasury professionals.
"These HR professionals have not necessarily needed precise financial acumen in running DC plans, however, in this new world of disclosure, there are tangled webs of fee relationships that require financial expertise in negotiating through and uncovering some of these 'hidden' fees," said Yata.
David John, senior research fellow, The Heritage Foundation, said he was seeing a number of employers who were very worried they could be held liable for fee arrangements between plan administrators and investment managers.
He said there was currently a court case concerning agricultural manufacturer John Deere concerning a fee arrangement where the company was being held liable for alleged unreasonable fees.
He said: "In this case, it includes fee sharing between the investment managers and the plan administrators that was never disclosed to the employer. The situation worries other employers who fear getting caught up in similar situations."
William McClain, principal, Mercer, said it was only when plans went out to bid that they realised they could make substantial savings.
He said, although service providers were responding by being proactive and providing additional information in the form of fee disclosure summaries or survey information, it was sometimes unhelpful because the data didn't necessary relate to the individual plan's circumstances.
The US Department of Labor proposed regulations earlier this year regarding reasonable service provider agreements and fee disclosure under Employer Retirement Income Security Act (ERISA).
Ann Combs, principle, Vanguard, said the firm supported regulatory efforts to improve fee disclosure and said the firm had a long history of providing transparency and disclosing its fees.
"We have been very active in sitting down with our clients and making sure they understand the fees and services," said Combs.
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