deloitte 401k study

8/8/2019 deloitte 401k study

1/33

Defned Contribution / 401(k)Fee Study

Inside the Structure o Defned Contribution / 401(k)

Plan Fees: A Study Assessing the Mechanics o WhatDrives the 'All-In' Fee

Conducted by Deloitte or theInvestment Company InstituteSpring 2009 - updated June 2009


2/332

I. Background 3

Report Disclosure 4

II. Executive Summary 5

Many Fee Arrangements Exist 5

A Means to Compare: The 'All-In' Fee 6 Apparent 'All-In' Fee Drivers Primary and Secondary 7

Summary 8

III. Survey Respondents 9

Plan Sponsor Demographics 9

Retirement Service Providers 10

Retirement Service Provider / Plan Sponsor Relationships 11

Participant Accounts 12

Plan Design Features 13

Investment Options 14

IV. The Mechanics o Plan Fees 15

V. The 'All-In' Fee 16

Composition o the 'All-In' Fee 16

Payer o Fees 17

Summary 'All-In' Fee Results 18

VI. 'All-In' Fee Drivers 19

Primary 'All-In' Fee Drivers 19

Secondary 'All-In' Fee Drivers 22

VII. Summary 31

Appendix: Glossary o Terms 32

Table o Contents


3/33Defned Contribution / 401(k) Fee Study 3

I. Background

Because reliance on de ned contribution plans as aretirement savings vehicle in the United States has grown,these plans have come under greater scrutiny to ensurethat they will help provide a secure retirement for themillions of working Americans who have access to them.Recently, both regulators and members of Congress havebeen looking closely at how service providers disclose feesand the Department of Labor has proposed fee disclosure

regulations to help plan sponsors and participants betterunderstand what their plans cost. Across the marketplace,heightened attention to plan costs has increased interestin how fee structures work and the key variables thatdrive fees.

As part of an ongoing comprehensive research program,the Investment Company Institute (ICI) engaged Deloitteto conduct a Survey of de ned contribution plan sponsorsand create this report to shed light on how fee structureswork within the de ned contribution plan market.Speci cally, this report addresses:

The mechanics of plan fee structures;Components of plan fees; andPrimary and secondary factors that impact fees("fee drivers").

ApproachTo accomplish the objectives of the Study, Deloitte andICI supplemented their collective industry experience witha con dential, no-cost, web-based Survey conducted byDeloitte in late 2008. The purpose of the Survey was tocollect market data to explore and understand how feeswork within the de ned contribution plan market.

In total, 130 plans participated in the Survey providing

detailed information regarding plan characteristics,design, demographics, products, services and theirassociated fees.Over 1,000 data elements were gathered from eachplan, covering plan design, investment options and plan,participant and investment fee information.Subsequent to the completion of the web-based Survey,Deloitte assessed the information for completeness andapparent accuracy.In addition, Deloitte conducted post-Surveyconversations with the majority of plan sponsorsto clarify responses.Six retirement service providers were also interviewed

to gain an institutional perspective on the results.Comments and feedback received from these retirementservice provider were considered and addressedthroughout this report. However, a formal survey ofretirement service providers was not conducted as partof the Survey.In some instances, results of the Survey were comparedto other 401(k) industry studies to assess ndings andinterpret results.

Increasing understanding o the mechanics o plan eesis a top priority within theretirement marketplace.

As used in this document, Deloitte means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of theDeloitte LLP and its subsidiaries.


4/334

While the Survey is not intended to be a statisticalrepresentation of the de ned contribution / 401(k)marketplace, the demographics of the plans participatingin the Survey appear to be similar to the broader de nedcontribution plan market (e.g., average account balance,number of investment options, average participantcontribution rate, asset allocation, plan design).Although Deloitte and ICI believe the Survey results are

representative, they cannot be projected to the entirepopulation of U.S. 401(k) plans.1

The Survey results were prepared utilizing primary dataobtained from sources deemed to be reliable, includingindividuals at the participating plan sponsor and retirementservice provider organizations. It is important to note thatsome plan sponsors did not respond to every question.Deloitte and ICI make no representation or warrantyregarding the accuracy of data provided.

In several instances, the report includes observations andinterpretations of the Survey results based on the collective

research and marketplace experience of both Deloitteand ICI.

The Survey report is designed to maintain plan respondentcon dentiality. Participating plan sponsor and providerdata will not be disclosed or used in any way outside ofthis Study.

The Survey does not evaluate quality or value of servicesprovided both of which can impact fees. Quality ofservice varies with respect to the range of planningand guidance tools available to the plan sponsor and

Report Disclosure

participants; educational materials; employee meetings;and other components of customer service. Qualitativedifferences in services may affect fees but are not easilyquanti ed and are not addressed in this report.

No part of this report may be reproduced in any form or byany means without the written permission of Deloitte.

The Investment Company Institute (ICI) is the nationalassociation of U.S. investment companies. Please seewww.ici.org for more information on ICI.

***

This report was originally posted in April 2009, however,correction of two minor errors on pages 24 and 30resulted in re-posting in June 2009.

Page 24: Based on the analysis performed, a 10percentage point higher asset allocation to equities (e.g.,equity assets rise from 40% to 50% of plan assets) resultedin 0.4 basis point or 0.004% higher 'all-in' fee. The

corrected amount is resulted in a 3.9 basis point or 0.039 percentage point higher all-in fee.

Page 30: Despite the relatively large difference in 'all-in'fees between plans with and without auto-enrollment thatis displayed across smaller plan sizes, the results of theregression analysis suggest a smaller impact of16 basis

points or 0.16 percentage points. The corrected amountis 14 basis points or 0.14 percentage points.

For the complete regression analysis, see the appendix.

1 Department of Labor Form 5500 data for plan-year 2006 indicate that the micro plan segment (plans with less than $1 million in assets ) represent 62% of all 401(k401(k) plan assets, and 10% of active 401(k) plan participants. The small plan segment (plans with $1 million to less than $10 million in assets) account for 30% ofand 20% of active participants. Mid-sized plans (those with $10 million to less than $100 million in assets) are 4% of plans, 16% of assets, and 23% of active parti(those with $100 million or more in assets) were only 1% of plans, but included 66% of all 401(k) plan assets, and 46% of all active 401(k) participants. (Form 550of plans covering 0.4% of active participants did not report assets.) See U. S. Department of Labor, Employee Bene ts Security Administration,Private Pension Plan Bulletin : Abstract of

2006 Form 5500 Annual Reports (Dec. 2008), available at www.dol.gov/ebsa/PDF/2006pensionplanbulletin.PDF.
http://www.ici.org/pdf/rpt_09_dc_401k_fee_study_app.pdfhttp://www.ici.org/pdf/rpt_09_dc_401k_fee_study_app.pdfhttp://www.ici.org/pdf/rpt_09_dc_401k_fee_study_app.pdf



II. Executive Summary

De ned contribution plans are an important componentof Americans' retirement savings. Their importance inhouseholds' saving for retirement has led to increasedscrutiny of de ned contribution plans at the regulatoryand legislative level with a focus on more transparencyin fee disclosure. The ripple effect of this scrutiny in themarketplace has been an increased need for plan sponsorsto more fully understand the fee structures and key fee

drivers in de ned contribution plans.

As part of ongoing research programs, ICI and Deloittecombined efforts to conduct research into fee structureswithin the de ned contribution plan market. The dataand observations in this report are based on the Surveyresponses of 130 plans. The Survey was conducted onlineand through plan sponsor interviews between November 1and December 31, 2008.

Many Fee Arrangements ExistOn the surface, a Survey on de ned contribution / 401(k)fees might seem straight-forward considering the services

required by a plan are relatively consistent across themarket. For example, de ned contribution plans generallyrequire compliance (to make sure the plan is administeredproperly), audit, Form 5500, and trustee services. Inaddition, recordkeeping, which maintains participantsaccounts and processes participants transactions,often also includes educational services, materials andcommunications. However, the Study found there to bevariation on how fees are charged for de ned contributionplan services.

Recordkeeping and administrative services can be chargeddirectly to the plan or participant or can be assessedas an asset-based fee. Also, a portion of the expenseratio of an investment option can be used to coversome of the recordkeeping and administrative costs.Asset-based investment-related fees represent aboutthree-quarters (74%) of de ned contribution / 401(k)plan fees and expenses for the plans in the Survey. Asset-based investment expenses generally include three basiccomponents: (1) investment management fees, which

Exhibit 1

RecordkeepingPlan and Participant ServicingCompliance

LegalAudit

Form 5500Trustee

Company StockCommunications

Education

InvestmentManagers

Investment ConsultantFinancial Advice

Defined Contribution Total All-in Fees

Per Plan Charges Asset-Based FeesAsset-BasedInvestmentExpenses

OtherPer Participant

Charges

are paid to the investment's portfolio managers (oftenreferred to as investment advisers); (2) distribution and/ or service fees (in the case of mutual funds, these include12b-1 fees); and (3) other fees of the investment option,

including fees to cover custodial, legal, transfer agent(in the case of mutual funds), recordkeeping, and otheroperating expenses. Portions of the distribution and/orservice fees and other fees may be used to compensate the

nancial professional (e.g. individual broker or investmentmanagement rm) for the services provided to the planand its participants and to offset recordkeeping andadministration costs.

All of the different services and associated fees canbe combined together in a variety of different waysbased on the requirements of the plan sponsor.As plan sponsors negotiate with retirement serviceproviders to obtain services for their plans, a range ofscenarios or arrangements is generally considered (e.g.,number and types of investment options, proprietaryversus non-proprietary funds, range of participantcommunications and educational services that will beprovided). Plan sponsors generally are not presented asingle fee quote, but rather a range of options from eachservice provider competing for the plan sponsor's business.

Exhibit 1


6/336

A Means to Compare: The 'All-in' FeeDue to the variety of fee and service structures that existin the de ned contribution / 401(k) market, this Studycreated a basis of comparison which normalized thefee structure variation. The Study created an analyticaltool that represents the bottom-line in terms of alladministrative and investment-related fees in de nedcontribution / 401(k) plans. Through the data collected and

analyzed in this Survey, an 'all-in' fee was calculated foreach plan. The 'all-in' fee incorporates all administration,recordkeeping and investment fees whether assessed at aplan level, participant level or as an asset-based fee, acrossall multiple parties providing services to the plan.

The 'all-in' fee excludes participant activity-related fees thatonly apply to particular participants engaged in the activity(e.g., loan fees).

Totaling all administration, recordkeeping and investmentfees, the median all-in fee for the plans in the Survey was0.72% of assets or approximately $350 per participant

for a participant with an account balance of $48,522 (themedian participant average account balance among plansin this Survey). The data show 10% of plans in the Studyhad an 'all-in' fee of 0.35% of assets or less, while 10% ofplans had an 'all-in' fee of 1.72% of assets or more.

'All-in' Fee: % of Assets (All Plans)

0.93%

0.72%

0.35%

1.72%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

Mean Median 10th Percentile 90th Percentile

Exhibit 2Exhibit 2



Apparent 'All-In' Fee Drivers Primaryand SecondaryThe 'all-in' fee varied widely due to a number of plan-related variables. However, total plan assets appearedto be the most signi cant driver of fees. With that said,further analysis shows that a more meaningful way to viewplan asset size is through two independent factors:

Number of participants; and Average account balance.

The number of participants and the average accountbalance are both negatively correlated with the 'all-in' fee.More participants and higher average account balancesboth tended to be associated with lower fees as apercentage of assets. Including both measures of the plansize in the statistical regression analysis more accuratelypredicts the differences in the 'all-in' fee of plans acrossthe Survey population.

Within any 401(k) plan, there are xed costs required to

start up and run the plan, much of which is driven bylegal and regulatory requirements. For example, thereare regulations requiring nondiscrimination testing, thatmonies are credited to accounts in a timely matter, planaudits, creating summary plan descriptions, and annualForm 5500 ling, among others. The Survey results appearto indicate economies are gained as a plan grows insize, because these xed costs can be spread over moreparticipants and/or a larger asset base.

In addition to plan size, a number of other factors helpexplain the variability in plan fees. Using a linear regressionanalysis, the Study identi ed these variables and they areconsidered secondary drivers in this Study.

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

$10,000 $30,000 $50,000 $70,000 $90,000 $110,000 $130,000 $150,000

F e e s a s a P e r c e n t o

f A s s e t s

Average Account Balance

10 Participants 100 1000 10,000 50,000Exhibit 3

Predicted Fees as a Percent of Assets by Average Account Size and Number ofParticipants (All Other Explanatory Variables = Means)

1,000

These secondary drivers can help explain why plans of similar asset or participanthave different overall costs. One or more of the following characteristics appearsrelated to lower 'all-in' fees:

Higher participant and employer contribution rates;Lower allocation of assets in equity-oriented asset classes;Use of auto-enrollment;Fewer plan sponsor business locations reducing the servicing complexity;

Other plan sponsor business relationships with the service provider (e.g., de ned plan or health and welfare plan).

When combining the primary and secondary drivers in a regression analysis, the rshowed a relatively high correlation with the 'all-in' fee (R2 of 0.6269) when treating the'all-in' fee (measured as a percentage of assets) as the dependent variable. Combinsize2 with the secondary driver variables, a predictive chart can be created that dis'all-in' fee by plan size that is consistent with the Survey results.

Exhibit 3

2 Plan Size entered the regression equation as two variables: LN(average account balance) and LN(number of participants).


8/338

SummaryThis report was developed to provide marketplace Surveydata that can help explain the mechanics, componentsand drivers of de ned contribution / 401(k) plan fees.This Study created an analytical bottom-line measurean'all-in' feeto compare total plan costs across the variedpricing practices (per-plan fees, per-participant fees, asset-based fees) used in de ned contribution / 401(k) plans.

To facilitate a more direct comparison of plan fees, an'all-in' fee was created based on the Survey responses.The results showed that the 'all-in' fee varies across plansof different plan size market segments. The Survey foundthat asset-based investment-related fees represent aboutthree-quarters (74%) of de ned contribution / 401(k)plan fees and expenses. In many plans, a portion of thesefees is used to pay for some or all of the administrativeand recordkeeping services of the plans, in addition toinvestment management.

The primary drivers of fees are average account balance

and number of participants, which combined, representplan size. Fees, measured as a percentage of assets, tendto decline as account balances and number of participantsincrease. De ned contribution / 401(k) plans have xedadministrative costs necessary to run a plan that tendto cause smaller plans to have higher relative fees as apercentage of assets or per participant. As a plan grows insize, economies are gained which spread the xed costsover more participants and a larger asset base.

Additional in uencers of fees that were found to appearto further help explain variances in the 'all-in' fee includeparticipant and employer contribution rates, a plan'sasset allocation, complexity, additional plan sponsorrelationships with the service provider, and plan design(auto enrollment).

A number of other variables were tested and appear not tobe direct drivers of the 'all-in' fee. The number of payrolls,which might have increased complexity, was not found tobe a driver of fees. The type of service provider (mutualfund company, life insurance company, bank, third partyadministrator) and tenure with the service provider alsowere not found to be signi cant factors. In addition, thepercentage of assets invested in the investment products

of the service provider (proprietary investments) did notappear to have a signi cant impact on fees.

The remainder of this report discusses the range of plansponsors and retirement service providers represented bythe Survey; the construction and analysis of the total feesin de ned contribution / 401(k) plans; and the factors thatin uence fees, referred to as drivers. Section III describesthe characteristics of the plan sponsors that participatedin the Survey. Section IV explains the mechanics of howfees are charged and the services that the plans and theirparticipants receive for the fees. Section V introducesthe concept of the comprehensive bottom-line or 'all-in'

fee, and how this measure facilitates comparisons acrossplans. Section VI identi es the key drivers that explainfee differences among plans. Section VII summarizes theStudys ndings.



III. Survey Respondents

This section highlights the characteristics of the plansponsors that participated in the Survey including theirdemographics, provider relationships, size and plan designfeatures. The purpose is to provide context when assessingplan fees as to the Survey participants.

Plan Sponsor DemographicsA total of 117 employers representing 130 de ned

contribution plans participated in the De ned Contribution / 401(k) Fee Study in 2008. For purposes of this Study, thedemographic information on the following pages was usedto help understand what speci c characteristics, if any,drive plan fees.

Plan sponsor respondents represented multiple geographicregions, industries and plan sizes as measured by assetsand number of participants.

To allow for a detailed view into variation of fees by marketsize segment, plan sponsor responses were grouped andanalyzed across ve plan size segments as measured by

plan assets.

Plans by AssetSize Segment

# oPlans

% o Plans

Micro


10/3310

Retirement Service ProvidersThe employer, or plan sponsor, offers the de nedcontribution plan to its employees as part of its employeebene t and compensation package. The plan sponsorthen engages service providers that see to the functionaloperation of the plan. The Survey considered the rm hiredto handle the plan recordkeeping to be the retirementservice provider to the plan. Recordkeeping services are

performed by a variety of service providers, includingmutual fund companies, insurance companies, banks orthird party administrators (TPAs).

Recordkeeping services include posting payrollcontributions, plan payments, earnings and adjustments;plan and participant servicing and communications;compliance testing and other regulatory requirements; andeducational materials and services. With respect to someactivities, plan sponsors may select varying degrees ofrecordkeeping service options. For example, among Surveyrespondents 75% held group employee meetings, 22%offered individual employee meetings, and 19% offered

both. More than one-third (36%) of responding plans hadnancial advice/guidance through third-party software

available for their participants. While nearly all (91% ofplans) procured enrollment kits through their retirementservice provider, about two-thirds (69% of plans) arrangedfor participant newsletters and/or videos.

Recordkeeping services for plans were delivered by 31different retirement service providers. The providersrepresented 18 of the top 25 recordkeepers as measuredby de ned contribution plan assets (Plan Sponsor,

Americas Top Recordkeepers / June 2008 ). At least sixdifferent providers were represented within each plan assetsegment analyzed.

53%

18%

19%

11%

Mutual Fund Co. Insurance Co. Banks TPAs

Type of Retirement Service Provider by Percent of Plans

Exhibit 9Note: Retirement service providers werecategorized by primary line of business.

Number o Retirement Service Providers Represented in Survey by Plan Asset Segment

Plan AssetSegment

TotalProviders

Mutual FundCompanies

InsuranceCompanies

Banks TPAs

Micro



Exhibit 10

Other Relationships with Service Provider by Percent of Plans

65%

13%9% 4% 2% 0%

15%

0%

10%

20%

30%

40%

50%

60%

70%

None DefinedBenefit Plan

BankingServices

Health &Welfare

Plan

PayrollProcessing

HumanResourceServices

Other

Note: Other relationships included insurance, non-qualified plans, actuarial, ESOP,stock plans and outsourcing.

28

10

3

11

3 1

14

1 2 35 3

43

3 4

18

9 9

45

1 2

9

20

13

All Plans


12/3312

$48,522

$24,410

$34,607$31,079

$58,534

$75,432

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

All Plans $500M

Exhibit 14

Median of Plan-Level Participant Average Account Balances by Asset Segment

$1M - < $10M $10M - < $100M

Participant AccountsThe Survey captured a wide range of average participaccount balances, providing an opportunity to gain insinto the economics of de ned contribution plans. Averparticipant account balances varied widely across plansponsor respondents and plan size segments. For examacross all plan sponsor respondents, the 10th percentilplan had an average participant account balance of

$15,386, while the 90th percentile plan had an averagparticipant account balance seven-fold higher ($107,941Similar to other de ned contribution plan reports,4 theSurvey found an average participant account balance o$56,874 (2008 reported data).

In terms of participant contributions, the average rate6.4%; more than half (53%) of plans reported averageparticipant contribution rates between 6% and 10%. Plsponsors also reported a range of employer contributioactivity. Among respondent plans, 92% had employercontributions, typically in the form of a match formulMany (34% of plans) matched at least 100% up to a

3% of pay, often then matching at 100% or a loweradditional employee contributions. Another 18% of plamatched 50 cents on the dollar (i.e., 50%) up to 6%of pay.

4 For example the EBRI/ICI 401(k) database, reporting on 21.8 million 401(k) participants in 56,232 plans holding $1.4 trillion in assets, has an average participant accoof $65,454 at year-end 2007. For more information on the EBRI/ICI Database, see Holden, VanDerhei, Alonso, and Copeland, "401(k) Plan Asset Allocation, Account Band Loan Activity in 2007",ICIPerspective, vol. 14, no. 3, andEBRI Issue Brief , Investment Company Institute and Employee Bene t Research Institute (Dec. 2008), available atwww.ici.org/pdf/per14-03.pdf.

Participant Average Account Balances Plan Level Averages

$56,874$48,522

$15,386

$107,941

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000


Exhibit 13

Average Participant Contribution Rate Per Plan byPercent of Plans

7%

31%

53%

9%



Plan Design FeaturesThe Survey examined a number of plan design featuresincluding automatic enrollment, automatic increases incontributions (also called auto step-up), managed accountsand company stock.

The most common plan design feature was auto-enrollment with 45% of plans offering this component

(similar to the 42% reported in theDeloitte 2008 Annual401(k) Benchmarking Survey). Of those plans withauto-enrollment, 71% default to a lifecycle target dateinvestment option with an average default contributionrate of 3%. Automatic step-up or increase is a less utilizedplan design feature; 25% of all plans in the Survey hadautomatic step-up or increase.

The Survey found that most (82%) plan sponsors donot offer managed accounts. About one-third (34%) ofrespondents have company stock within their plan.

Although not technically part of plan design, additional

plan characteristics were analyzed (number of locations,number of payrolls and method of submitting payrolls), togain insight as to whether business complexity impactedplan fees.

In terms of complexity, 42% of plans indicated they havemore than 20 business locations while 24% reported one.The Survey also found that 49% of plan sponsors processonly one payroll and of those, 95% submit their payrollelectronically. The impact of such business complexity onfees will be discussed later in this report.

58

32 2444

72

98 10686

Auto-Enrollment Auto Step-Up Managed Accoun ts Company StockYes No

Plan Design Feature Utilization by Number of Plans

Number of Business Locations by Number of Plans

31

15 1316

55

0

10

20

30

40

50

60

1 2 - 4 5 - 9 10 - 19 20+

Exhibit 17

Number of Payrolls by Percent of Plans

49%

19%

32%

1 2 3 or moreExhibit 18

Exhibit 16

Exhibit 17

Exhibit 18

45% 25%18%

34%


14/3314

Investment OptionsThe number of investment options offered varied widelyfrom three investment options to approximately 100different choices. The average number of investmentoptions offered per plan was 15 (similar to the averageof 17 investment options reported in theDeloitte 2008

Annual 401(k) Benchmarking Survey) .5

With 91% of plans offering them, mutual funds were themost common investment vehicle used by plans. However,when reviewing investment vehicle use by plan size,the Study showed a greater utilization of separate andcommingled accounts by larger plans.

Equity (99% of plans) and xed income (92% of plans)investment options represented the most common assetclass types offered among plans within the Survey. Thenext most common asset class types offered were targetdate investment options (72% of plans) and guaranteedinvestment contracts (GICs) and other stable value funds(70% of plans).

Investment Vehicle Use

Percent o Total Assets in Survey

Percent oPlans Utilizing

Mutual Fund 41% 91%

Separate Account 25% 37%

Commingled Trust 25% 56%

Other* 9% 36%

Exhibit 19

* Other primarily included Company Stock

Asset Class Use

Percent o Total

Assets in SurveyPercent o

Plans UtilizingEquity 39% 99%

Target Date 12% 72%

Stable Value/ GICs 12% 70%

Fixed Income 11% 92%

Company Stock 8% 34%Balanced 6% 49%

Money Market 5% 45%

Lifestyle 2% 27%

Other* 6% 21%

Exhibit 20

* Other included loans, self-directed brokerage balances

The number o planinvestment options variedaround an average o 15.

5 Counts a suite of target date investment options as one investment option.



Recordkeeping & AdministrationPlan Service and Consulting

Legal, Compliance and Regulatory

Direct Fees: $ Per Participant; %Asset Based; Transactional Fees

Defined Contribution / 401(k) Plan Fee Mechanics

Services ProvidedFee Payment / Form of Fee Payment

Participant Service, Education, Adviceand Communication

Employer / Plan

Participants

Recordkeeper /Retirement Service

Provider

Investment Manager

Recordkeeping / administrative

payment(% of assets)

Expense Ratio (% of assets)

Direct Fees:$ Per Participant;% Asset Based;Transactional Fees

Asset Management

Recordkeeping;Distribution

Exhibit

IV. The Mechanics o Plan Fees

Understanding the mechanics of how fees are charged isimportant when assessing plan fees and drivers. De nedcontribution / 401(k) fees can be divided into two basicparts: investment fees and administrative fees.

At their core, de ned contribution / 401(k) plans are atax-advantaged savings vehicle in which individualstypically select the asset allocation of their accounts given

the range of investment options offered by their plans.A key component of a 401(k) plan is the assetmanagement services that the investment managerprovides. These asset-based fees are reported as anexpense ratio of the mutual fund, separate account,commingled account, or other investment product inthe plan.

Unlike a retail investment account, de ned contribution / 401(k) plans must comply with certain regulations toensure that they are equitable in their coverage of workers.These regulations create additional administrative needsbeyond what one might require in a retail investment

account. Administrative support services of the plan areprovided to the employer and participant in the form ofrecordkeeping, consulting, legal, regulatory, compliance,communication and education services.

Payment for these administrative services can be handledin a number of ways. The plan sponsor will determinewho pays the fee (employer or participant) and how it isassessed. Payment for administrative services is generallyhandled through one or more of the following methods:

Dollar per participant fees that are paid for by theemployer, participant or both;Dollar per plan fees that are paid by the employer,participant or both;Asset-based fees (based on a percentage of plan orinvestment assets) that are paid for by the employer,participant or both; andSpecialized participant activity related fees, most oftenpaid for by participants engaging in the activity(e.g. loans).

Within de ned contribution / 401(k) plans, the managerof an investment option may agree to pay a portion of itsinvestment fee to a service provider (in the case of 401(k)plans, generally the recordkeeper). The amount (oftenreferred to as revenue sharing) is used to help offset thecost of the administrative services which would otherwisebe charged directly to the plans and/or participants. Theinvestment providers' payment to the recordkeeper helps

cover the costs of recordkeeping multiple accounts, whilethe investment provider services one large account.

These fees present themselves in a variety of waysincluding 12b-1 fees, sub-transfer agency fees, andshareholder servicing fees. Additionally, they are sometimesnegotiated between the investment manager and theretirement service provider (recordkeeper). When plansuse proprietary investment optionsthat is the investmentprovider is af liated with the plans recordkeepersomeof those asset-based investment fees can be used to coveradministrative services.

Exhibit 2


16/3316

V. The 'All-In' Fee

To clearly understand the total fees of each plan, thisStudy calculated an 'all-in' fee to allow for a moredirect comparison of fees being paid by the plansparticipating in the Survey. Viewing fees from an 'all-in'fee perspective addresses the range of varying structuresand arrangements for service payments due to 1) differentservice delivery mechanisms and associated fees and 2) perplan, per participant and asset-based fee types. By rolling

all services and fee types into an 'all-in' fee, the data canbe analyzed more consistently across plans and withinsegments to compare and discern different fee levels.

Composition o the 'All-In' FeeFor the purpose of this Study, the 'all-in' fee was based onfour primary service elements:

Investment management;1.Administration, recordkeeping, communication and2.education;Financial advice to participants; and3.Plan sponsor investment consulting.4.

The total fee elements were dominated by the fees andexpenses of investments (74%) and separately chargedrecordkeeping/administrative (23%) fees.

Additional highlights of the 'all-in' fee composition include:

Plan sponsor investment advisor fees external to therecordkeeper were reported by 21% of plans; andSeparately charged plan fees for independent nancialadvice for participants existed in 8% of plans.

Asset-based charges oninvestments make up themajority o the 'all-in' ee.

'All-in' Fee Service and Fee Components

Service Fee Component

Investment management1. Asset-based charges to the mutual fund,commingled or separate account used to payfor managing the investment.

Administration, recordkeeping,2.communication and education

Per participant, per plan, or asset-basedfees used to pay for recordkeeping, planand participant servicing, communications,education, compliance testing, Form 5500,plan audit, legal and trustee services.

Financial advice to participants3. Asset-based or per participant fees associatewith providing participants with nancialadvice and guidance (often provided througha third party's software model).

Plan sponsor investment consulting4. Fees paid to an outside consultant hired bythe plan sponsor to assist with plan set-up,investment design, search and selection ofinvestment managers and other plan advisoryservices.

Transactions and Other Items Not Included

Loan initiation and maintenance, quali ed domestic relations order, distributions,self-directed brokerage, managed accounts and other transactions driven byparticipant elections and typically paid for by the individual participant engaged ithe specialized activity.

Exhibit 23



Payer o FeesWith regard to plan fees, participants bear the majorityof 401(k) costs. Similar to any other employee bene t(e.g., health insurance), the employer determines whetherthe employee, employer, or both will pay for the bene t.According to Survey respondents, plan participants pay83% of the total plan fees while employers cover 13% andthe plans cover 4%.* Of the participant fees, a majority is

derived from the investment holdings and the asset-basedcharges primarily associated within investmentexpense ratios (some of which may be used to coverrecordkeeping and administration).

Employers that sponsor plans with less than $10 million inassets, on average, carried a larger share of plan fees thanemployers sponsoring plans of $10 million or greater inassets. Plan sponsors of plans with less than $10 million in

Participants pay themajority o plan ees inthe orm o investmentexpense ratios.

83%

66% 66%

83%90%

86%

13%

31% 34%

11%3%

13%

4% 3% 0%5% 6%

1%

All Plans


18/3318

0.93%

0.72%

0.35%

1.72%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2.00%


Exhibit 27

'All-in' Fee: % of Assets (All Plans)

$397$346

$103

$842

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900


'All-in' Fee: Annual Plan-Level Dollar Per Participant (All Plans)

Exhibit 26

Exhibit 27

Summary 'All-In' Fee ResultsFor this Survey, the 'all-in' fee was analyzed in two ways,as a percentage of plan assets and as an annualper-participant dollar amount.

The median 'all-in' fee which includes the recordkeeping,administrative and investment fees across all plans in theStudy was:

Percentage of plan assets 0.72%; orAnnual per-participant dollar amount $346.

Fees of 401(k) plans vary greatly due to unique plancharacteristics, plan / investment design, range and qualityof services provided, and pricing strategies employed byretirement providers. As such, there are a large numberof variables impacting the fees that plans and participantspay. The remaining sections of this report explore whatappear to be possible drivers of this variation at a macrolevel (all plans) and within individual segments (micro,small, mid, large and mega-plan size markets).



VI. 'All-In' Fee Drivers

In response to the Survey, plan sponsors supplied data fora variety of plan related, service provider related, and plandesign variables. Deloitte looked to identify what appearedto be the primary drivers of fees across all plans (macroview) and apparent secondary drivers of fees within similarsized plans (micro view).

The analysis included assessing the impact and correlation

of multiple independent variables on the dependentvariable the 'all-in' fee. The dependent variable (fees)was assessed in two different methods or calculations ofthe 'all-in' fee: 1) the 'all-in' fee as a percentage of assets,and 2) annual dollar per-participant fee.

Primary 'All-In' Fee DriversPrimary drivers include the key variable(s) impacting feesacross plans in the Survey. The results of the statisticalregression analysis pointed to the size of the plan as aprimary driver of plan fees. More speci cally, the numberof participants and average account balance weresigni cant and had independent effects: as the averageaccount balance and number of participants rise, fees as a

percentage of assets tend to fall.

1.89%

1.27%

0.78%

0.61%0.41%

0.00%0.20%0.40%0.60%0.80%1.00%1.20%1.40%1.60%1.80%2.00%

$500M

Median All-In Fee by Plan Asset Segment(% of Assets)

Exhibit 28

Average account balance

Number of participants

Years with current provider

Provider industry type

Provider size

Plan sponsor industry

Geographic location

Employer contribution

Number of investment options

Number of payrolls

Participant contribution rates

Company stock

Investment vehicles

Investment allocation

Proprietary / non-proprietary

Auto-enrollment / step-up

Number of locations

Plan asset size

PlanRelated

Potential Drivers

Service

ProviderRelated

PlanDesign

Variables

Provider relationship

$1M -


20/3320

Plan Asset SizeAt the macro level, the primary driver of fees appears to beplan asset size, with the number of participants and averageaccount balance contributing signi cantly and independentlyto the fee levels.

Key points about the primary driver of fees:As plan size increases in assets and participants, the 'all-in'

fee (measured as a percentage of assets) decreases.On average, the median 'all-in' fee within an asset segmentwas 20% less for plans with average account balances over$100,000.While the median plan's 'all-in' fee was 0.72% of assets,median fees among plans with less than $1 million in assetswere 1.89% of plan assets and for plans with more than$500 million in assets, the median 'all-in' fee was less than0.50%.The Survey data indicate that once a plan reaches $10million in total assets, or 1,000 participants, the median feedrops to less than 1% of assets - suggesting that a level ofeconomies of scale is obtained.

Plans with smaller total assets tend to have smaller averageaccount balances compared to larger plans, which alsocontributes to the higher relative costs as a percentage ofassets of smaller plans.

Economies o scale appearto be gained as a plangrows in size, lowering its'all-in' ee.

1.89%

1.27%

0.78%0.61%

0.41%

2.37%

1.18%

0.89%0.69%

0.42%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

$500M

Median Average Median: All Plans

'All-In' Fee by Asset Segment (% of Assets)

Exhibit 30

$1M -



Fixed vs. Variable Costs of PlansWhether required by law or deemed necessary to run aplan, there are xed costs for operating any plan. Thesecosts include plan accounting and audit, legal advice(such as plan document services), plan compliance testingand basic set-up costs. While there are some variablecomponents to these costs as the plans become largerand more complicated, these necessary/ xed aspects are

required for all plans.

As with any xed costs, the more assets over which thesecosts can be spread, the lower the level of costs per dollarof assets. Hence, plans that have fewer assets to spreadthese costs over tend to have on average higher fees whenmeasured as a percentage of assets. Also, as the cost isspread over more participants, the xed costs of a plandecline per participant.

Investment Fees Investment fee ndings include:

Asset-based fees on investments represent 74% of thetotal 'all-in' fees.As plan size grows, the declining xed costs as apercentage of assets allows plans to move to lowerexpense ratio investment options such as institutionalshare class mutual funds and commingled trusts. Thisphenomenon was seen in the Study particularly in planswith more than $250 million in assets.The Study found that plans larger than $500 million inassets had direct recordkeeping charges representing

a higher percentage of the 'all-in' fee, suggesting achange in pricing structure in which the largest plans useinvestment options that do not subsidize recordkeepingand then pay for recordkeeping separately.

Recordkeeping FeesRecordkeeping fee ndings include:

The micro market (plan assets less than $1million in assets) on average bears the highest recordkeeping fees(measured as a percentage of plan assets) believed to bedue to xed recordkeeping costs associated with a plan.Plans and associated recordkeeping fees appear to fall as

xed costs become a lower percentage of assets as planassets grow larger in size.


22/3322

0.35%

1.42%

0.87%

0.61%0.35%

0.14%

1.72%

2.30%

1.62%

1.30%1.09%

0.61%

0.00%

1.00%

2.00%

3.00%

All Plans $500M

Exhibit 32

$1M -



Participant and Employer Contribution RatesFrom the retirement service providers perspective, planswith high levels of participant or employer contributions,which may lead to plan growth, are generally viewed asmore attractive than those with lower expected assetgrowth. As such, expected plan asset growth may bea key element for service providers to consider whendetermining fees.

Plans with higherparticipant or employercontribution rates tended tohave slightly lower 'all-in'

ees.

1.46%

0.91%

0.65%0.60%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%


24/3324

Plan Asset AllocationAs described earlier in this Study, a signi cant share of the'all-in' fee was attributable to asset-based investment-related fees. Analyzing the investment costs can helpexplain the variances in fees within plans similar in size.

Equity investment options are more costly to manage thannon-equity or xed-income investments. As expected,the Survey data displayed higher average asset-basedfees for equity oriented investments versus others. Asplan allocation to equity investments increases, the totalinvestment cost will correspondingly typically increase.

Based on the analysis performed, a 10 percentage point

higher asset allocation to equities (e.g., equity assets risefrom 40% to 50% of plan assets) resulted in a 3.9 basispoint or 0.039 percentage point higher 'all-in' fee.

Conversely, as plan allocation to cash or xed-income styleoptions increases total investment fees tend to decrease.When compared to the median average expense ratio ofequities (0.77%), the Survey showed, median investmentfees for:

Target date investment options, which hold a mix ofequities and xed-income investments, were 12% lower(with a median plan-level average expense ratio of0.68%).Fixed-income investment options were 43% lower (witha median expense ratio of 0.44%), andMoney market investment options were 45% lower(with a median expense ratio of 0.42%).

Plans with higher allocationo assets in equities tend tohave higher investment ees.

Exhibit 35

0.77%

0.44% 0.42%

0.34%

0.68%

0.60% 0.57%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

Equity Fixed-Income MoneyMarket

GICs andOther Stable

Value

Target Date Balanced Lifestyle

Median of Plan-Level Average Expense Ratio by Asset Class

Exhibit 35

Money market investment options and stable valuefunds perform similar functions as capital presentation

vehicles in investment line-ups in plans. In the Study,stable value funds are more frequently used by largerplans, which tend, in general, to have lower 'all-in' feesand lower investment expenses. In addition, stable valuefunds, which are not registered under the InvestmentCompany Act of 1940, are not subject to the standardizedreporting of expenses that mutual funds provide in fundprospectuses. The fee for managing a stable valuefunds portfolio holdings, which include GICs and similarinstruments, is often reported as a trustee fee or similarfee. (Nevertheless, a few Survey respondents reportedno expenses for their stable value fund, and these wereexcluded in calculating the median fee reported in

Exhibit 35).



Complexity According to the Survey, the number of plan sponsorlocations increases both the complexity of servicing theplan and the fees charged (presumably for the addedadministrative cost).

As the number of locations increases, typically so do theadministrative fees, speci cally those related to onsiteservices (e.g., enrollment meetings, group or individualemployee meetings). This factor accounts for somevariation in fees for plans of similar size within the small-and medium-sized segments. For example, fee differences

are most pronounced in those plans with $1 million to lessthan $10 million in assets.

More locations requiringservice appears to increase

ees in the small marketsegment.

The fees for the large and mega plan size market (morethan $100 million in assets) are the exception as theydo not appear to be impacted by a sponsor's number oflocations.

Additionally, the Survey found another traditional measureof complexity number of payrolls not to be an indicatorof total plan fees. Plans with higher numbers of payrolls

were not found to have higher recordkeeping costs. Theelectronic nature of accepting payrolls and providersrequiring information in standard formats appear to havecreated greater ef ciencies that help offset the potentialincreased complexity.

0.94%

0.78% 0.81%

0.42%

1.44%

0.71%

0.58%

0.34%

1.60%

0.88%

0.66%

0.42%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

$1M -


26/3326

1.26%

1.98%

1.14%

0.95%0.70%

0.04%

0.70%

1.31%

0.72%0.61%

0.35%

0.72%

1.35% 1.41%

0.83%0.72%

0.42%0.59%

1.51%

1.07%

0.69%0.59%

0.45%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

All Plans $500M



Retirement Service Provider TypeThe 'all-in' fee by provider type (mutual fund company,insurance company, bank or TPA) was not an identi eddriver based on the results of the Survey.The size of the provider was not an indicator of totalfees by market segment. When measured in terms ofparticipants on the recordkeeping system, the Surveydata did not consistently nd evidence of smaller fees for

the largest providers.A provider's market focus can be a driver of fee levels.Based on the results of the Survey, a providers focusand specialization in a particular market (e.g., small orlarge) is a better indicator of fee levels than solely thoseproviders with the largest number of participants on theirrecordkeeping system. This may be a result of:

A providers pricing strategy for winning inparticular markets.Operating/business models built for serving aparticular segment (e.g., the highly customized megaplan market).Possible dif culty in moving down market for the

largest providers and up market for the smaller planservice providers.Possible unique service offerings of providers.Brand strength or quality of a particular provider may justify higher fees.

Segmenting service providers into tiers based on thenumber of participants on their recordkeeping systemsprovides a concise snapshot to compare volume withmedian 'all-in' plan fees by the provider tier. This analysisdoes not attempt to describe the range of servicesprovided and does not factor in the range or quality ofservices provided:

Tier 1: greater than 3,000,000 participantsTier 2: between 1,000,000 and 3,000,000 participantsTier 3: less than 1,000,000 participants

The type or size o theretirement service providerdoes not appear to be anindicator o the 'all-in' ee.

1.62%

0.80%0.66%

0.29%

1.51%

1.12% 1.06%

0.75%

0.26%

1.89%

1.20%

0.76%

0.52% 0.46%

2.03%

1.13%

0.81%0.62%

0.23%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

$500M

Bank Insurance Mutual Fund TPA

Median 'All-In' Fee (% of Assets) by Retirement Service Provider Type

Exhibit 38

$1M -


28/3328

Broader Plan RelationshipsIn general, plan sponsors that have multiple relationshipswith their service provider have lower percentage of assetsde ned contribution / 401(k) fees. This suggests that itmay be advantageous from a pricing perspective for a plansponsor to obtain retirement and other bene t offeringsfrom an entity with which it has an existing businessrelationship. This could reduce start-up and ongoing costs

(e.g., service provider works with payroll data foranother purpose).

Speci cally, based on the data collected in the Survey andwhen holding all other variables constant, having a de nedbene t or health and welfare plan relationship with thesame service provider appears to lower the 'all-in' fee by14 basis points or 0.14 percentage points.

While it was not consistent in every plan size segment,plans with multiple de ned contribution relationshipswith the same provider seem to have lower relative fees.

0.87%0.68%

0.72%

0.36%

1.89%

1.38%

0.80%

0.60%0.42%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

$500M

Defined Benefit / Health & Welfare Relationship

No Defined Benefit / Health & Welfare Relationship

Median 'All-In' Fee: Additional DB / H&W Provider Relationships

Exhibit 40

$1M -



Proprietary vs. Non-Proprietary Investment OptionsWithin the retirement plan market, it is common forinvestment line-ups to have a combination of bothproprietary and non-proprietary investment options. Asstated earlier, the majority of plans in the Survey (77%)use at least one proprietary investment from their serviceprovider. The prevalence of proprietary or non-proprietaryoptions within a plan does not appear to be a signi cant

driver of 'all-in' fees:

A higher allocation of assets to proprietary investmentoptions did not appear to cause higher 'all-in' feesacross plan size segments.The regression analysis did not identify proprietary ornon-proprietary investment use as a signi cant driver ofthe 'all-in' fee.The Survey results indicate that proprietary andnon-proprietary investment fees are not signi cantlydifferent.

The use o proprietaryinvestment options does notappear to be a driver o the'all-in' ee.

0.61%

2.03%

0.87%0.78%

0.59%

0.34%

0.76%

1.97%

1.32%

0.91%

0.66%0.51%

0.76%

1.87%

1.20%

0.69%0.62%

0.42%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

All Plans $500M


30/3330

Plan DesignAuto-enrollment is designed to enroll participants inthe plan at a set contribution rate. Another automaticdesign feature is the option to escalate the participantcontribution percentage in the future. The passage of thePension Protection Act of 2006 further accelerated theadoption of these features in the marketplace. The Surveydata suggest that those plans with auto-enrollment have

lower total fees (measured by percentage of assets) thanthose without the feature.

Despite the relatively large difference in 'all-in' feesbetween plans with and without auto-enrollment thatis displayed across smaller plan sizes, the results of theregression analysis suggest a smaller impact of 14 basispoints or 0.14 percentage points.

Although the auto-enrollment feature can have a positiveimpact on increasing assets in the plan, it also typicallyincreases the number of participants with low balancesand therefore increases the administrative cost of running

the plan. As a result of the combination of these twoimpacts, auto-enrollment may not be in and of itselfdriving the 'all-in' fee lower, but may rather be re ectingsome other factors such as the age of the plan, the lengthof the time over which auto-enrollment has been in place,or other plan features that were not captured in theSurvey.

Additionally, providers may anticipate that auto-enrollmentwill lead to more advantages (increased assets undermanagement) than disadvantages (cost of small balanceparticipants). Similarly plans with auto step-up, whichincreases the contributions over time, also tended to havelower 'all-in' fees.

1.34%

1.00%

0.73%0.59%

0.38%

1.89%

1.36%

0.99%

0.64%

0.42%

0.00%

0.20%

0.40%

0.60%

0.80%1.00%

1.20%

1.40%

1.60%

1.80%

2.00%

$500M

Plans with Auto-Enrollment No Auto-Enrollment

Median 'All-In' Fee by Auto-Enrollment Use

Exhibit 44

$1M -



VII. Summary

Range o Fee ArrangementsDe ned Contribution/401(k) fees are charged in a varietyof ways for the services provided. Typical fee structuresinclude asset-based investment fees, per-participantrecordkeeping fees, per-plan recordkeeping andadministration fees, and per-plan advisory fees. As plansponsors work with retirement service providers to setup or administer their plans, a range of scenarios or

arrangements is generally considered. This report does notaim to assess those ranges, but to calculate anex-post comprehensive plan fee. To compare fees across plans,this bottom-line or 'all-in' fee was calculated combiningall administration, recordkeeping, and asset-basedinvestment fees. At the end of the day, whether a plansponsor is adding up component fees or looking at a morecomprehensive package, the 'all-in' fee allows for a moredirect comparison across plans.

The 'All-In' FeeThe 'all-in' fee which includes recordkeeping,administration, and investment management, was

evaluated in two ways: (1) percentage of total plan assets,and (2) annual dollar per participant amount. Across allplans in the Survey:

The 'all-in' fee varied from 0.35% of assets (10thpercentile) to 1.72% of assets (90th percentile).The median plan's 'all-in' fee was 0.72% of plan assets.The median plan's annual dollar per participant feewas $346.

Plan Size Appears to be Primary Driver o 'All-In' FeeThe 'all-in' fee varied due to a number of plan-relatedvariables. Statistical regression analysis found that plansize appeared to be the most signi cant driver of fees.More speci cally, further analysis showed that a moremeaningful way to view plan asset size was through twoindependent factors:

Number of participants; andAverage account balance.

Both number of participants and the average accountbalance were negatively correlated with the 'all-in' fee.Within any de ned contribution / 401(k) plan, there are

xed costs required to start up and run the plan, manyof which are driven by legal and regulatory requirements(e.g., compliance testing, audit, Form 5500). The Surveyresults appear to indicate economies are gained as a plangrows in size, because these xed costs can be spread over

more participants and/or a larger asset base.

Other Factors Are Secondary Drivers o FeesIn addition to plan size, a number of other factorsappeared to help explain the variability in plan fees.Linear regression analysis found that lower 'all-in' feesappear to be related to:

Higher participant and employer contribution rates;Lower allocation of assets in equities-orientedasset classes;Use of automatic enrollment;Fewer plan sponsor business locations, which reduces

servicing complexity; andOther plan sponsor business relationships with theservice provider.

On the other hand, number of payrolls, which mighthave increased complexity, was not found to be a driverof fees. The type of retirement service provider (mutualfund company, life insurance company, bank, third partyadministrator) and tenure with the retirement serviceprovider also did not appear to be signi cant factors.In addition, the percentage of assets invested in theinvestment products of the service provider (proprietaryinvestments) did not seem to have a separate impacton fees.


32/3332

Appendix: Glossary o Terms

Terms Defnition

Active Plan Participants Individual currently participating in an employer-sponsored retirement plan.

Auto-Enrollment The practice of enrolling eligible employees in a plan and initiating participant deferrals without requiringthe employees to submit a request to participate.

Auto Increase / Step-Up A provision found in some 401(k) plans that allows an eligible employee to increase their contributionrate at a pre-established point-in-time.

Communication / EducationServices

Participant communication and education services relating to providing print, video, software and/orlive instruction to educate employees about how the plan works, the plan investment funds, and assetallocation strategies.

Company Stock Services Services needed for the recordkeeping and administration of company stock.

Compliance Testing Plans engaged in testing required by the IRS to ensure the 401(k) plan is fair to both highly compensatedand non-highly compensated employees.

Custom Services Additional or enhanced non-standard services (e.g., website, call center, branding, etc.) selected by theplan sponsor.

Education Materials These materials are provided to plan participants to help educate around the need for retirement,investment options, how to properly plan for retirement, how to calculate retirement savings, etc.

Eligible Plan Participants Any employee who is eligible to participate in and receive bene ts from a plan.

Employee Meetings These meetings with employees explain the bene ts of participating in the plan, answer questions aboutsaving and the plan, and provide an understanding of the plan speci cations.

Employer Contribution A contribution made by the company to the account of the participant (often times in the form of acompany match based in ratio to contributions made by the participant).

Expense ratio An investment options total annual operating expenses, including for investment managementand administration of the investment, expressed as a percentage of assets. For mutual funds, this iscalculated pursuant to SEC rules for fund prospectuses; other investment options may provide plans asimilar number expressing the investment options fees.

Financial Advice / Guidance Advice or guidance provided to participants in the plan by a third party.

Form 5500 Reporting This annual plan nancial reporting form is required by IRS/DOL/PBGC.

Guaranteed InvestmentContract (GICs)

These accounts with an insurance company guarantee a xed rate of interest over the length of thecontract.

Investment Related Charges Asset-based fees for investment management and other related services generally are assessed as apercentage of assets invested; paid in the form of an indirect charge against the participants account orthe plan because they are deducted directly from investment returns.

Legal Services Legal support services provided to the plan.

Managed Accounts An account for which the holder gives a third party the authority to manage the investing of assets.

Nondiscrimination Testing Regulations may require this annual testing to assure that the amount of contributions made by and on

behalf of non-highly compensated employees is proportional to contributions made by and on behalf ofhighly compensated employees.

Participant ContributionRate

The amount (typically expressed as a percentage of the contribution base) that an employee contributesto the plan.

Plan Assets The total assets held among all participants within the plan.

Plan Audit An independent audit required by federal law for all plans with more than 100 participants.

Plan Document Services Development, maintenance and consulting related to the plan documents of a plan.

Plan Sponsor InvestmentAdvisor

Third party consultant hired by the plan sponsor to assist with plan design, investment design, searchand selection process and other plan advisory services.

Quali ed Domestic RelationsOrder (QDRO)

A judgment, decree or order that creates or recognizes an alternate payee's (such as former spouse,child, etc.) right to receive all or a portion of a participant's retirement plan bene ts.

Trustee Services Services typically provided by the bank or trust company having duciary responsibility for holdingplan assets.


33/33

This publication contains general information only and is based on the experiences and research of Deloittepractitioners. Deloitte is not, by means of this publication, rendering business, nancial, investment, or otherprofessional advice or services. This publication is not a substitute for such professional advice or services,nor should it be used as a basis for any decision or action that may affect your business. Before makingany decision or taking any action that may affect your business, you should consult a quali ed professionaladvisor. Deloitte, its af liates, and related entities shall not be responsible for any loss sustained by any person

h li hi bli i

About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and itsnetwork of member rms, each of which is a legally separate and independent entity.Please see www.deloitte.com/about for a detailed description of the legal structure ofDeloitte Touche Tohmatsu and its member rms. Please see www.deloitte.com/us/aboutfor a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

For more in ormation, please contact:Daniel RosshirtPrincipalDeloitte Consulting LLPTel. 212-618-4586Email: [email protected]

Scott ParkerSenior ManagerDeloitte Consulting LLPTel. 612-397-4654Email: [email protected]

About the Investment Company InstituteThe Investment Company Institute (ICI) is the national association of U.S. investmentcompanies, including mutual funds, closed-end funds, exchange-traded funds (ETFs), andunit investment trusts (UITs). ICI seeks to encourage adherence to high ethical standards,promote public understanding, and otherwise advance the interests of funds, theirshareholders, directors, and advisers. Members of ICI manage total assets of $10.18trillion and serve over 93 million shareholders. For additional information about ICI and itsresearch, please see www.ici.org.

deloitte 401k study

Documents