An Investigation of Administrative Fees in Defined Contribution Plans

Administration of defined contribution retirement plans is generally outsourced by plan sponsors to third-party financial institutions, resulting in two primary types of plan fees. While investment fund fees in defined contribution plans have been heavily scrutinized, the administrative fees paid to third-party plan administrators are less understood. Our study highlights the importance of securing fee reimbursements from third-party plan administrators to avoid excessive administrative fees, and situations in which the plan sponsor must be particularly careful to ensure these reimbursements are secured. The findings have important implications as the scrutiny of plan fees intensifies with continued regulatory change