Communicating retirement plan value to participants in the wake of fee disclosure

Cheaper isn't always better

Upon receiving the first wave of fee communications, some participants may be tempted to move their money into a cheaper investment option. This can be an unwise decision, as in most cases this hasty choice probably will not consider important factors such as the investment option's asset class, personal retirement timelines or investment risk tolerance. Participant fee disclosure communications should therefore stress the many variables that go into investment option selection. Likewise, participants should be made aware that evaluation of fees is not only about making fee comparisons with other plans, as an apples-to-apples comparison isn't always possible.

The investments, plan services and educational programs a participant receives may differ significantly from other plans available through other employers. Costs are also affected by other variables, such as the size or type of plan. Ultimately, the plan sponsor is responsible for evaluating service and investment options to be sure the fees their participants pay are reasonable – and will want to communicate the value behind these fees accordingly. In most cases, you get what you pay for.

Service sets plans apart

It's important for participants to understand that fees cover expenses related to valuable services, such as: professional investment management, customer service, investment and retirement education, administration and recordkeeping. In addition, some service providers offer enhanced educational resources and dedicated representatives that work directly with participants as they map out their path to retirement.

And in some instances, providers may offer a smaller plan access to services and programs typically only offered to larger plans. All of these services come at a price and participants should be made aware that enhanced services typically come with higher fees.

Personalized communication is key

In addition to complying with the new disclosure requirements, plan providers and sponsors are increasingly trying to reach participants on their own terms. For some workers, statements aren't enough, which is why providers offer personalized tools and resources to help participants become familiar with the total value of the plan.

This may come in the form of highly knowledgeable customer service representatives or onsite retirement consultants and benefits representatives who can meet with participants face-to-face and ensure that employees understand the fees and the valuable services and benefits those fees are paying for. The expertise of these individuals and the support they offer factor into the fees that participants will see.

Fee disclosure is a great opportunity to engage and educate participants on the value of their retirement benefit, yielding a greater appreciation for the benefits of participating in the plan and, ultimately, greater employee satisfaction. Supporting participants in their efforts to understand fee disclosure, the fees themselves, and the value of the plan will ultimately empower plan sponsors and participants to make informed decisions that will help them collectively achieve better retirement outcomes for participants.

Abbie Pancoast is chief counsel of Retirement Plan Services at Lincoln Financial Group. Bob Melia is vice president of product strategy, Product and Solutions Management at Lincoln Financial Group Lincoln Financial Group is the marketing name for Lincoln National Corporation, Fort Wayne, Ind., and its affiliates.