PLAN SPONSORS initially gravitate toward judging their retirement plan recordkeeper based
largely on cost, says adviser Joshua Ulmer, describing his frequent experience working with
new clients. He helps them shift their focus onto the value received for those fees.
“We know from ERISA [Employee Retirement Income Security Act] that there is not an
obligation for the fees to be low: There is an obligation that fees be reasonable for the services
being rendered,” says Ulmer, corporate retirement director at The SeaPort Group at Morgan
Stanley, in Portland, Oregon, and the 2017 PLANSPONSOR Retirement Plan Adviser of the
Year. “So we help sponsors understand what recordkeeping services are commoditized and
what services add value—and we define ‘value’ as things that contribute to better participant
outcomes and/or alleviate critical administrative duties for plan sponsors.”
Basic recordkeeping services increasingly have become commoditized, Ulmer says. And,
with the pickup in fee-focused participant lawsuits, sponsors increasingly associate failing to
utilize the lowest-fee provider with risk and liability. “So it’s incumbent on us as advisers to
understand the nuances of these recordkeeping arrangements,” he says.
As fiduciaries, plan sponsors need to balance recordkeeping fees and value received, says
attorney Jennifer Eller, co-head of the fiduciary practice group at Groom Law Group, Chartered,
in Washington, D.C. Although sponsors are not required to use the lowest-cost provider, she
says, they often feel compelled to do so. “They’ve seen in fee lawsuits that plaintiffs’ lawyers are
basically saying, ‘This is a commodity; it’s all the same. So you just need to buy the cheapest,’”
she says. “In reality, it’s not that you’re necessarily prudent because you get the cheapest
options. But I totally understand how many sponsors have come to think they need to focus on
Which recordkeeping services
are worth the extra cost?