Benchmarking Fees vs. Evaluating Providers: Why Both Matter, and Why Sponsors Confuse Them

Why Fees Are Only One Part of Fiduciary Oversight

Most sponsors believe they’re compliant if they benchmark fees every few years.

But benchmarking alone doesn’t answer:

• Is the vendor capable?
• Is the service model aligned?
• Are there conflicts of interest?
• Is this still the best choice for our plan?
• Courts and regulators expect a holistic, impartial evaluation, not just a spreadsheet.

Fee Benchmarking Alone Leaves Major Gaps

Benchmarking does not evaluate:

The DOL expects sponsors to evaluate services and fees to ensure they are “reasonable”. Benchmarking typically only covers the cost side of the expectation.

You could have “reasonable fees” and still fail fiduciary scrutiny if the vendor isn’t meeting the plan's needs.

• Service quality
• Staffing levels
• Technology platforms
• Operational performance
• Contractual protections

What a True Provider Evaluation Looks Like

A compliant evaluation includes:

Capabilities Analysis

Are the vendor’s resources sufficient for your plan size and complexity?

Service Model Alignment

Does the provider’s structure fit your culture and needs?

Technology Review

Is the platform competitive, secure, and efficient?

Operational Metrics

What does performance data show about accuracy, responsiveness, and participant outcomes?

Evaluations tell the full story, benchmarking tells only one chapter.

The Danger of Relying on Vendors to Provide Their Own Comparisons

Vendor-supplied benchmarking often:

• Excludes key competitors
• Uses selective data
• Minimizes gaps
• Emphasizes strengths rather than neutrality
• It may be informative, but it cannot be independent.

Why Both Benchmarking and Evaluation Must Work Together

Together they provide:

• Cost clarity
• Operational insight
• Fiduciary defensibility
• Documentation that withstands scrutiny
• Sponsors need both, and courts expect both.

The Complete Picture = Protection

When you combine benchmarking + full evaluation, you get the clarity, neutrality, and documentation required for fiduciary safety.