Principal Financial Group has released a sample fee policy
statement to help plan sponsors and advisers get a better grasp of the fee
structure surrounding retirement plans.
“Recent regulations and fee litigation have certainly raised
awareness of the need to closely monitor fees and services,” says Greg Burrows,
senior vice president of retirement and income solutions at Principal. “While
there are many ways to go about that, we think using a fee policy statement
helps simplify and streamline the documentation process.”
Under the Employee Retirement Income Security Act (ERISA),
plan fiduciaries must consider the interests of different participant classes
and determine how any fee allocation method would affect them, while also
acting prudently. The Department of Labor (DOL)’s Conflict of Interest rule or fiduciary
rule is expected to extend the role of fiduciary to some in the greater
financial-services industry who were previously unaffected.
With its fee policy statement, Principal intends to offer
guidelines presenting fee evaluation as a documented process that can zero in
on how fees affect individual participants along with a rational basis for the
chosen approach.
“Plan fiduciaries should fulfill their responsibilities
prudently—and have something to show for it,” says Steve Saxon of Groom Law
Group, who consulted with Principal on the sample statement. “A properly
drafted fee policy statement is a valuable resource to help reflect the process
for evaluating fees and expenses and show that the plan fiduciary understands
their responsibilities.”
For example, a fee policy statement could cover: The plan’s
purpose, fiduciary duties relating to the plan’s payment of fees and monitoring
and evaluating whether fees are reasonable, including how and when fees will be
reviewed. It could also analyze fee collection methods and how they are
evaluated, as well as communicating fees to participants.
“Plan sponsors often look to their advisers for expertise in
managing fees and services,” says Burrows. “Helping them create a fee policy
statement is an opportunity for advisors to further demonstrate their fiduciary
support.”
Additional resources to help advisors strengthen
client relationships and optimize their practice are available at
principal.com/valueadd. For
more research, analysis and insights from Principal, visit the
Principal Knowledge Center.