A Yale Law School professor recently raised hackles in the benefits community by sending unsolicited letters to thousands of retirement plan sponsors.  Ian Ayres, who is the William K. Townsend Professor at Yale Law School, is studying the financial impact of investment and administrative fees in retirement plans.  Using data from Forms 5500 filed for the 2009 plan year, Prof. Ayres identified plans that he believes have excessive costs.

Over the past few weeks, Prof. Ayres mailed about 6,000 letters to plan sponsors.  There are several versions of these letters.  In the most controversial version, Prof. Ayres tells the plan administrator that he has identified the plan as a potential high-cost plan and he intends to publicize the results, making his results available to newspapers (including the New York Times and Wall Street Journal) and disseminating the results via Twitter with a separate hashtag for each company with a high-cost plan.

Reactions in the benefits community to Prof. Ayres’ mailings have ranged from appreciation of his attempts to emphasize the issue of excessive fees to anger at his unsolicited advice and his threats to publicize a company’s allegedly high fees.  Regardless of one’s personal opinion of his tactics, this controversy is a good reminder of the need to be vigilant on plan costs.

Plan fiduciaries are required to ensure that the costs of services to the plan are reasonable.  Plan sponsors should establish an ongoing, objective process for monitoring all plan fees and ensuring that those costs are reasonable.  This process may require that the plan sponsor engage advisors to assist on the fee review process.  Plan sponsors who engage in a prudent process for evaluating plan fees will satisfy their fiduciary obligations and have little reason for concern.

For further information visit Waller’s ERISA Exchange blog