GAO: Higher fees more likely in 403(b) plans

By Doug Halonen
October 5, 2009, 3:44 PM ET

Participants in 403(b) plans are more likely to pay higher fees than those in other kinds of defined contribution plans, in part because 403(b) plans don’t have the resources to hire retirement plan specialists, according to a GAO report.

While not providing any data comparing fees paid by participants in different kinds of DC plans, the Government Accountability Office report, based on GAO interviews with DC plan experts, said sponsors of 403(b) plans generally take fewer actions to decrease participant fees than sponsors of other kinds of DC plans.

“First, many sponsors of 403(b) plans are public schools and tax-exempt organizations, and experts told us they may not have the resources to hire plan administrators who are retirement plan specialists,” the GAO report said. “Instead, the staff who administer these plans are often responsible for payroll or other administration and may lack guidance on ways sponsors can reduce participants’ fees,” the report stated.

The report also said sponsors of 403(b) plans often also sponsor defined benefit plans, and “experts told us that sponsors may not feel as motivated to play an active role in these (the 403(b)) plans since the 403(b) plan is supplemental,” the GAO report said.

The report, “Retirement Savings, Better Information and Sponsor Guidance Could Improve Oversight and Reduce Fees for Participants,” was requested by House Ways and Means Committee Chairman Charles Rangel, D-N.Y.

Contact Doug Halonen at dhalonen@pionline.com