NAPA Net - Polling Places 051322

How Are (Should?) Recordkeeping Fees Be Allocated?

Recordkeeping is a tough, low margin business. Once upon a time, per participant charges were a recordkeeping norm. Then revenue-sharing led many, perhaps most, to adopt asset-based fees that covered recordkeeping services. The latter has, of course, been repeatedly criticized in litigation.

There are, of course, rationales for both – asset-based fees mean that larger (and ostensibly higher-income) balances help subsidize newer participants, whereas (as pretty much every excessive fee litigation reminds us) there’s likely little difference in cost in administering a $100,000 participant account versus one that has just $100.

All that said, the issue of how to charge for recordkeeping services remains a point of legal “contention”, even though even the plaintiffs’ bar concedes that there is nothing “per se” illegal about the asset-based approach – and the courts don’t seem to have an issue with it, either.

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* 1. How do the plans you work with assess recordkeeping charges?

All asset-based.

Most asset-based.

About half asset-based, half per-participant

Most per-participant based

All per-participant based.

Other thoughts?

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* 2. Do you find that plan size matters in that determination?

Yes, larger plans more likely to use per-participant

Yes, larger plans more likely to use asset-based.

Plan size doesn't seem to make a difference.

Newer, smaller plans more likely to go with asset-based.

No, it's all driven by the recordkeeper.

It's all driven by plan sponsor preference.

It's mostly driven by advisor recommendation.

Other thoughts?

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* 3. Have you seen a shift in this fee structure over the past two years?

Yes, more interest in per-participant due to litigation concerns.

Yes, more interest in asset-based at my recommendation.

Yes, more interest in asset-based.

Yes, more interest in per-participant at my recommendation.

Yes, more interest in per-participant.

No real shift.

Other thoughts?

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* 4. Do YOU have a preference in recommendations?

Yes, I favor asset-based.

Yes, I favor per-participant

It really depends on the plan/plan needs & size

No - I see and recommend both.

Care to expand on that?

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* 5. Other comments about recordkeeping fees, how recordkeeping fees are assessed, the pros/cons of per-participant versus asset-based, the trends in per-participant versus asset-based, the impact that litigation - or concerns about litigation - have/might have on per-participant versus asset-based, the equity of per-participant versus asset-based recordkeeping charges, or life in general?

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* 6. What is your role working with retirement plans?

Advisor

Provider

TPA

Plan sponsor

Recordkeeper

Other (please specify)

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* 7. What size plans do you PRIMARILY work with?

Under $10 million in assets

$10-$20 million

$20-$50 million

$50-100 million

$100 million - $250 million

$250 million - $500 million

Above $500 million

Other (please specify)

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* 8. Suggestions for future survey questions?

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* 9. All responses are anonymous and confidential, of course - but if you'd like me to know who you are, or allow for a response, you can leave your email below...