Conducting your annual plan review - DWS Investments

SERVICE PROVIDERS AND FEESSelecting competent service providers and monitoringthe value of their services are two necessaryresponsibilities of a plan sponsor. In addition, plansponsors are also required to carry out their dutiesprudently and solely in the interest of the plan’sparticipants and their beneficiaries. To do this,sponsors have an obligation to investigate and fullyunderstand all costs associated with the plan, thenecessity of the services provided and the impactof expenses on participant accounts, and to insurethat the costs associated with each of the servicesrendered are “reasonable.”Your annual plan review helps you carry out theseresponsibilities by following a prudent process to selectand supervise service providers and to determine howthey are compensated. This process may now be easierbecause of the enactment of new service providerdisclosure rules under ERISA 408(b)(2) that went intoeffect on July 1, 2012 for all new and existing ‘coveredservice provider’ arrangements. These rules now require‘covered service providers’ 1 to provide responsiblefiduciaries with information they need to accuratelyassess reasonableness of total compensation, bothdirect and indirect, received by the covered serviceprovider, its affiliates, and/or subcontractors; identifypotential conflicts of interest; and satisfy reporting anddisclosure requirements under ERISA, including underthe Participant Disclosure Regulation.IMPORTANT SERVICE PROVIDERCONSIDERATIONSYour annual plan review should document yourselection and monitoring of the following aspects ofeach (both covered and non-covered) service provider:■■Complete description of services■■Cost of services, including direct and indirectcompensation as well as termination fees, for‘covered service providers’■■History and experience■■Comparable client base■■Investment fees and expenses■■Participant satisfaction, including quality of services■■Outsourced services and compensation includingstatus as a fiduciary or Registered InvestmentAdvisor for covered service providers■■Overall financial condition■■Commitment to the retirement plan business■■Insurance, bonding, and licensing, if applicable1In general, a covered service provider is a service provider who enters into a contract or arrangement with the plan and expects to receive $1,000or more over the life of the arrangement for providing services to the plan and who falls into one of the following categories: serves as a fiduciaryto the plan or to an entity or investment product that holds ‘plan assets’ in which the plan invests or provides services to the plan or such entityregistered investment advisor; provides recordkeeping or brokerage services in connection with making investment options available (e.g. througha platform); or provides other services (e.g. legal, accounting) if the service provider expects to receive indirect compensation, (i.e. compensationthat is not paid by the plan or plan sponsor).12 » Conducting your annual plan review