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ST. PAUL, Minn.--(BUSINESS WIRE)--The Department of Labor has recently finalized regulations which require service providers to provide plan fiduciaries with information that they can use to determine the reasonableness of fees.
Securian Retirement’s latest position paper, “Finding the lowest cost share class,” provides insights to assist retirement plan fiduciaries – employers who offer 401(k) plans to their employees -- make informed decisions about the investments they choose for their plans.
“Cost comparison is a fiduciary best practice when it comes to retirement plan investments,” says Kent Peterson, director, Investment Services and senior associate actuary, Securian Financial Group, Inc. “The lowest cost share class of an investment option isn’t always the least expensive.”
Plan service providers often use mutual funds as underlying plan investments. Mutual funds frequently come in various share classes, each with a different expense structure. In the paper, Peterson explains that service providers do not always present employers with all the information they need to make informed decisions.
For example, Class A shares of a fund often have a higher net fund operating expense than Class I shares. But if the service provider passes the payments it receives from the mutual fund company through to the plan participant, the net expense to the participant of the Class A shares may be lower than the cost of the Class I shares.
“We encourage plan fiduciaries to ask about revenue neutrality and fee transparency when they look at investment options so they can determine the true cost of each option,” said Peterson. “Comparison shopping may reduce a participant’s overall expense and thereby help increase investment returns. This helps show that the plan sponsor takes very seriously the fiduciary responsibilities associated with this important employee benefit.”
Since 1880, Securian Financial Group and its affiliates have provided financial security for individuals and businesses in the form of insurance, investments and retirement plans. Now one of the nation’s largest financial services providers, it is the holding company parent of a group of companies that include Minnesota Life Insurance Company.
Products and services are provided by one or more of the following affiliates of Securian Financial Group, Inc: Minnesota Life Insurance Company, or Securian Retirement, a unit of Minnesota Life, 400 Robert Street North, St. Paul, MN 55101-2098. ©2011 Securian Financial Group, Inc. All rights reserved. Securian Retirement: www.SecurianRetirementCenter.com
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Insurance products are issued by Minnesota Life Insurance Company in all states except New York. In New York, products are issued by Securian Life Insurance Company, a New York admitted insurer. Both companies are headquartered in Saint Paul, MN. Product availability and features may vary by state. Each insurer is solely responsible for the financial obligations under the policies or contracts it issues.
© 2005- Securian Financial Group, Inc. All rights reserved.