Retirement Plan Evaluation System for Fee Reasonableness
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Solution Overview
Problem
The challenge for Plan Sponsors is to determine the reasonableness of fees in Defined Contribution (DC) Plans, as traditional methods are laborious, expensive, and limited in comparing fees and services across different plans, with many fees being hidden, making it difficult to assess the value of a plan compared to others.
Innovation Solution
A method and system for evaluating retirement plans by receiving and comparing data from multiple plans, identifying similar plans based on factors like assets, participants, and services, and generating reports that highlight fees, services, and participant success measures, allowing for a comprehensive apples-to-apples comparison.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Measurement precision
If traditional Request for Proposal (RFP) process is used to evaluate DC Plans, then Plan Sponsors can assess fee reasonableness, but the process becomes laborious, expensive, and time-consuming
Solution Approach 1:
The system creates a virtual copy of the DC Plan by extracting and storing its characteristics (fees, services, participant data, investment options) into a database. This digital replica allows automated comparison with benchmark plans without requiring manual RFP processes, thereby reducing time and cost while maintaining assessment accuracy
Solution Approach 2:
The system introduces a computer system as an intermediary between the Plan Sponsor and the complex evaluation process. This intermediary automatically collects plan data, compares it against benchmarks, and generates reports, eliminating the need for manual RFP procedures and reducing both time and expense
2Measurement precision
If traditional RFP process is used to compare DC Plans, then fee assessment is possible, but the ability to compare plans comprehensively is limited
Solution Approach 1:
The system is designed to handle multiple comparison dimensions simultaneously - fees, services, participant characteristics, investment options, and plan design features. The single platform can compare a selected DC Plan against multiple benchmark plans across all these dimensions, providing comprehensive evaluation that traditional RFP processes cannot achieve
Solution Approach 2:
The system adds multiple dimensions to the comparison process by incorporating not only fee data but also service quality metrics, participant demographics, investment performance data, and plan design characteristics. This multi-dimensional approach enables apples-to-apples comparisons that traditional single-dimensional RFP processes cannot provide
3Measurement precision
If Plan Sponsors manually evaluate DC Plans, then they can assess value, but hidden fees make comprehensive evaluation difficult
Solution Approach 1:
The system extracts all fee information from the DC Plan, including hidden fees that are not readily apparent to Plan Sponsors. By systematically pulling out fee data from various sources (investment options, service providers, administrative costs), the system makes previously hidden information visible and comparable against benchmarks
Solution Approach 2:
The system provides feedback to Plan Sponsors by generating detailed reports that highlight hidden fees and areas where the DC Plan performs better or worse than benchmarks. This feedback mechanism reveals information that would otherwise remain concealed, enabling more informed evaluation of plan value
Data Source
AI summary
A system and method for comparing retirement plans against a selected group of similar plans is disclosed. In one embodiment, a computer system for evaluating a retirement plan comprises a computer server having a database comprising a plurality of data defining a plurality of characteristics of each of a plurality of retirement plans, software configured for identifying a subset of the plurality of retirement plans having characteristics comparable to characteristics of a selected retirement plan, software configured for permitting the selection of at least one report from a plurality of report types, and software configured for automatically generating the selected at least one report, where the at least one report comprises an evaluation of the characteristics of the selected retirement plan against the characteristics of the subset of the plurality of retirement plans.