What Retirement Plan Sponsors Should Benchmark Now

For retirement plan sponsors, benchmarking has become a familiar fiduciary exercise. However, in many cases, the process is still too narrow — focused on one line item, one provider quote, or one investment expense ratio.

A sound benchmarking review should give fiduciaries a broader view of plan cost, service quality, and participant value. In today’s environment, sponsors need to look across the full plan ecosystem: recordkeeping, investments, advisory services, third-party administration, managed accounts, retirement income programs, and participant education. The objective is not simply to find the cheapest arrangement. It is to determine whether fees are reasonable for the services delivered and whether the plan’s structure continues to support better participant outcomes.

In other words, benchmarking should be less about price shopping and more about fiduciary discipline.

Look beyond the investment expense ratio

Investment fees often get the most attention, and for good reason: They are typically the largest single component of total plan cost. But an investment-only review can leave sponsors with an incomplete picture.

The more prudent approach is holistic. A plan may show competitive fund pricing while still paying above-market fees for recordkeeping, bundled administration, or advisory services. Or the reverse may be true: A sponsor may focus on trimming administrative costs while overlooking opportunities to improve investment share classes or lower the cost of participant advice solutions.

For committees, the takeaway is straightforward: Benchmark the full arrangement, not just the most visible fee.

Recordkeeping: still a critical starting point

Recordkeeping remains the operational engine of a defined contribution plan. Fees in this category can cover participant account maintenance, transaction processing, compliance testing support, and reporting, as well as the plan’s technology platform, including websites, mobile tools, and call center support.

But recordkeeping fees are rarely simple.

Some providers charge a per-participant fee, while others use an asset-based formula, a flat annual fee, or a blended structure. Each method leads to different outcomes as a plan grows. Asset-based pricing, for example, may appear modest at first but can become increasingly expensive as assets rise. Per-participant pricing can offer greater transparency and predictability, particularly for larger plans.

Service scope matters just as much as price. Not every provider includes the same functions in the base fee, and ancillary charges — such as loan processing, distribution processing, custom communications, and plan amendments — can materially change the economics.

Sponsors also should examine the participant experience. Digital tools, mobile access, and account support vary widely across providers, and those differences can affect engagement and outcomes. A benchmarking review that ignores service quality in favor of headline cost risks missing the bigger fiduciary picture.

The market has pushed recordkeeping fees lower over the past decade, thanks to provider competition, improved technology, and litigation pressure. Even so, fee variation remains significant, particularly among small and midsized plans. That makes normalization essential. Sponsors should benchmark on a per-participant basis and adjust for plan size, asset levels, and actual service scope.

Investments: fee compression does not eliminate the need for review

The shift toward lower-cost investments has been one of the defining trends in the retirement plan market. Institutional share classes, collective investment trusts (CITs), and passive options have helped many plans reduce investment costs meaningfully.

Still, sponsors should not assume their lineup is optimized simply because expense ratios look low.

Benchmarking investment fees should begin with the menu structure itself. Are participants in the lowest-cost share class available? Would CITs or separate accounts offer savings? Is the plan using active management where it has conviction, or simply carrying legacy funds that have not been revisited?

Sponsors also should assess the asset-weighted expense ratio across the menu, not just the stated cost of individual funds. What participants actually pay depends on where participants are invested, and that broader measure often provides a more useful lens for fiduciary review.

The active-versus-passive question also deserves renewed attention. A higher-cost active strategy is not inherently imprudent, but committees should be well-versed in the justification for the added cost. That analysis should be tied to the role the strategy plays in the lineup and whether the expected benefit outweighs the higher fee.

For larger plans, custom target-date funds and white-label structures may also enter the conversation. These approaches can help reduce costs and improve fiduciary control, but they require stronger governance and oversight.

The bottom line: Benchmarking investments means more than comparing expense ratios. It means evaluating whether the menu’s construction still aligns with the plan’s size, philosophy, and participant needs.

Advisory fees: one of the most variable cost categories

Advisory fees are often harder to benchmark than recordkeeping or investments, because the services are less standardized. One adviser may provide periodic investment reviews; another may function as an embedded fiduciary partner who supports governance, vendor oversight, plan design, and participant education.

That is why advisory fee benchmarking should start with role clarity.

Is the adviser serving as an ERISA Section 3(21) fiduciary, offering recommendations while the sponsor retains decision-making authority? Or is the adviser acting as a Section 3(38) investment manager with discretion over investment decisions? The answer matters, because fiduciary status and scope should be reflected in the fee.

Sponsors also should pay close attention to fee structure. Asset-based pricing remains common, but it merits scrutiny as plans grow. Adviser workload does not necessarily rise in direct proportion to assets, and that can create misalignment over time. Flat-dollar, project-based, or hybrid arrangements may be more appropriate in some cases.

Conflicts of interest should be part of the review as well. Revenue sharing, referral arrangements, or proprietary product compensation can complicate the analysis and should be clearly understood.

Among all plan costs, advisory fees may be the least standardized and the most relationship-driven. That makes apples-to-apples comparisons difficult — but no less necessary. Committees should benchmark against peers with similar plan complexity and service needs, rather than relying on broad market averages alone.

TPA fees: small line item, big operational impact

For sponsors using unbundled administration, third-party administrator (TPA) fees are another area that deserves more attention than it often receives.

A TPA may be responsible for compliance testing, top-heavy determinations, plan document preparation, amendments, Form 5500 support, and other core administrative functions. These services may represent a relatively small share of total plan cost, but they can have an outsized impact on operational accuracy and fiduciary risk.

Benchmarking here should account for complexity. Plans with multiple contribution sources, cross-testing, new comparability formulas, or multiple employer structures generally require more specialized work and therefore cost more to administer.

Sponsors also need visibility into whether TPA services are billed separately or bundled into another provider’s fee. When administrative services are wrapped into a recordkeeping arrangement, it can be difficult to isolate the true cost without requesting a more detailed breakdown.

And cost is only part of the equation. Accuracy, timeliness, and responsiveness matter. A low-cost TPA that delivers late testing results or incomplete filings may create more risk than value.

For committees, the practical question is not just whether the TPA fee is competitive, but whether the provider is delivering the level of service the plan requires.

Managed accounts and retirement income: benchmark the added layer

Managed accounts and retirement income solutions are drawing greater interest from sponsors looking to improve participant outcomes, particularly as plans mature and decumulation becomes a more pressing issue.

But these features can introduce a new layer of fees, and that layer deserves careful scrutiny.

Managed account programs often sit on top of underlying investment expenses. As a result, sponsors should look at total participant cost, not just the managed account fee in isolation. The key issue is value: Does the added personalization — through customized allocation, glide path adjustments, or behavioral coaching — produce a meaningful benefit relative to lower-cost alternatives?

Adoption is another important consideration. If utilization is low, the committee should assess whether the service materially improves outcomes or simply adds complexity to the plan’s offering.

Sponsors should also compare managed accounts with target-date funds, which often serve a similar purpose at a lower cost. If the plan either offers or defaults participants into a more expensive personalized solution, fiduciaries should be prepared to explain why.

The same logic applies to retirement income products, including in-plan annuities and systematic withdrawal features. These programs may support retirement readiness, but benchmarking should evaluate cost, usage, and the quality of the participant solution.

With litigation and regulatory scrutiny continuing in this area, documentation matters. Sponsors should be able to show not only that they reviewed fees, but that they assessed whether the program’s value justified its cost.

Participant services: do not benchmark access alone

Participant education and financial wellness programs have become a larger part of the defined contribution value proposition. Providers increasingly bundle or separately price tools such as one-on-one counseling, retirement readiness programs, digital planning tools, and financial wellness workshops.

These services can be meaningful differentiators — but only if participants actually use and benefit from them.

That means benchmarking participant services should go beyond a checklist of what is available. Sponsors should evaluate utilization rates and measurable outcomes. Are participants increasing savings rates? Improving diversification? Demonstrating better retirement readiness? If not, the presence of a service alone may not justify the fee.

Delivery model also matters. Digital, phone-based, and in-person formats carry different costs and may produce different engagement results. The right approach depends on the workforce and how participants prefer to access help.

Sponsors also should watch for overlap. If the recordkeeper, adviser, and investment provider all offer education or advice services, committees should determine whether those services complement one another or create duplication and confusion.

As participant services continue to expand, fiduciaries should resist the temptation to benchmark them purely on cost. In this category especially, the cheapest option may not be the best value.

The benchmarking standard is reasonableness, not minimalism

The current retirement plan environment continues to push sponsors toward more rigorous fee review. But the most effective committees understand that benchmarking is not a race to the bottom.

It is a process for testing whether plan fees remain reasonable relative to services, complexity, and participant benefit.

That means asking harder questions. Not just: What are we paying? But also: What is included? How does this compare with similarly situated plans? Are we paying for services participants use? Are we getting the level of fiduciary support, operational quality, and participant experience the plan needs?

For sponsors, that broader lens is where benchmarking becomes most useful. Not as a procurement exercise, but as a governance tool.

And in an era of heightened scrutiny, that may be the most important benchmark of all.

All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful.

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