Rethink The Way You Evaluate Your Retirement Plan
Review your retirement plan with the same purchasing discipline you apply to every other professional service.
Understand what you’re paying relative to the value.
Make better decisions with ongoing advice.
Why The Retirement Plan Purchasing Process is Broken
Retirement plans should be treated like every other professional service.
Most employers already know how to purchase professional services. They assess quality, compare pricing, negotiate compensation, and decide whether the value justifies the cost. Employers can apply that same purchasing discipline to provider performance, compensation, fees, services, and governance to make more informed retirement plan decisions.
But purchasing discipline requires price to be visible.
An attorney or accountant sends an invoice that states the cost in dollars. That makes the expense tangible and gives the buyer an opportunity to ask: What did we receive for this? Seeing an invoice for $18,742 creates a very different experience from seeing a percentage deducted from plan assets. The dollar amount gives the buyer a reason to ask what they received for those dollars.
Retirement-plan compensation is often different. Much of the cost of a retirement plan is paid directly from participant accounts rather than by the employer, making those expenses less visible to the people responsible for evaluating the plan. When fees are silently deducted from plan assets with no invoice showing the dollar amount, the cost is experienced primarily as a percentage rather than as an actual expense in dollars. An invoice showing the cost in dollars would make that expense more visible—but an invoice alone still isn't enough.
To evaluate whether the price represents good value, employers also need to understand what services were provided and, where relevant, how much time was spent providing them. And even that doesn't answer the most important question:
What would other qualified providers charge in dollars for comparable services?
Only with price, services, and market context can an employer meaningfully compare what it's paying to the value it's receiving.
Beyond Benchmarking
A benchmark can tell you what other plans pay. It can't tell you whether you're getting good value.
Questions Every Employer Should be Able to Answer:
How many hours did your advisor and administrator spend on your plan last year?
How much in dollars has each service provider charged to the participants and/or employer each year for the past three years?
If plan assets doubled, should provider compensation double too or even increase at all? Why or why not?
When was each provider's compensation last negotiated?
Which fees are paid by the employer, and which are paid by participants?
What Plan Sponsors Should Then Be Able To Do:
Know What You’re Buying: Understand what each provider is actually responsible for, what services are being delivered, and how much time and attention the plan is receiving.
Know What You're Paying: See what each provider is being paid in actual dollars, who is paying it, how compensation is calculated, and whether the amount changes as plan assets change.
Know Whether You're Getting a Good Deal: Compare what you're paying with the services you're receiving and what comparable providers would charge for similar work.
Make Better Investment Decisions: Know what investments your current platform makes available, what restrictions or limitations apply, how its flexibility compares with other platforms, and evaluate the investment lineup for diversification, cost, and suitability while supporting participants in making informed investment decisions.
Strengthen Provider Accountability: Use clear expectations, documented services, and regular review to evaluate providers and negotiate compensation throughout the life of the plan.
What the Data Shows
Since 2009, Paul D. Sippil & Associates has reviewed thousands of Form 5500 filings and organized retirement plans into industry-specific research databases—including approximately 247 law firms, hundreds of medical practices, financial firms, architecture firms, alternative schools, and other sectors. That work ultimately led to a curated longitudinal database of 1,340 retirement plans used to study how provider compensation, services, governance, and participant outcomes evolve over time.
Many of these conclusions are shared by Ted Benna, widely recognized as the father of the modern 401(k), who has long questioned the industry's reliance on asset-based compensation and argued that advisors should focus more on helping participants achieve successful retirement outcomes.
“The advisors are getting paid each time they go through the process with an employer to help pick funds as if they're doing an original piece of work. There are more than half a million 401(k) plans, so that's happened over half a million times. The fund menus aren't that much different. But advisors are getting paid as if they're doing an original piece of work. That's just bizarre, extremely inefficient and much too expensive.
They need to get away from asset-driven compensation and be paid a fee for service, the same as accountants or attorneys, who don't get paid a percentage of corporate [client] assets. Their role should shift to helping people focus on how to succeed at retiring successfully, not on investment return. Building a smarter investment mix is pretty much of a commodity now. The focus should be on goals: "I want to retire successful. Help me do that." [So] instead of teaching clients small-cap, large-cap, value vs. growth and that stuff, help participants find ways to save more to do a better job of financial management and focus on the stream of income they'll [need] for their retirement.”
Ted Benna, the inventor of the 401k
"The goal isn’t simply to reduce fees. It’s to ensure every dollar spent reflects real value"
— Paul Sippil, Forensic 401(k) Consultant
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