As many plan fiduciaries can attest, retirement plan fees can be extremely complex and difficult to understand. This is due in large part to the lack of transparency surrounding plan fees and services, as well as the complicated and varying methods in which service providers are compensated.

Recognizing this problem, federal regulators have passed new rules requiring service providers to disclose their fees to plan fiduciaries. Although these rules will ultimately benefit retirement plans and participants, they place increased pressure on plan fiduciaries to interpret and evaluate the appropriateness of service provider compensation – a task many fiduciaries aren’t prepared to undertake. More than ever, it’s critical for plan fiduciaries to understand the various components of their retirement plans’ fees, particularly indirect fees and the concept of revenue sharing.

The following describes common ways that money flows through retirement plans. (Each provider may operate differently, so be sure to check with your provider for information specific to your plan.)

Service Provider Compensation
In general, plan fees cover expenses resulting from services provided in four primary areas:

• Investments
• Recordkeeping
• Administration
• Advisory or brokerage services

These fees may be categorized as direct compensation, indirect compensation, or both.