System and method for evaluating defined contribution plans

• US 8,510,198 B2
• Filed: 06/18/2010
• Issued: 08/13/2013
• Est. Priority Date: 06/18/2009
• Status: Active Grant

• Current Assignee: Fiduciary Benchmarks Insights, LLC
• Original Assignee: Fiduciary Benchmarks, Inc.
• Inventors: Kmak, Thomas R., Eisen, Ronald B., Lacy, Edna O., Golda, Matthew A., Rosenthal, Craig S.
• Primary Examiner(s): RANKINS, WILLIAM E
• Application Number:
  US12/819,079
• Publication Number:
  US 20110145166A1
• Time in Patent Office: 1,152 Days
• Field of Search: 705/35
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 10/10 Office automation; Time management
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 99/00 Subject matter not provided for in other groups of this subclass

Abstract

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.

Claims

1. A method of evaluating a retirement plan, comprising the steps of:

a. receiving data comprising fee data, cost data, and value data corresponding to a plurality of retirement plans;

b. storing the data in memory on at least one web-accessible computer;

c. determining from the fee data, via a processor associated with the at least one web-accessible computer, a fee component associated with each of the retirement plans and for each of a plurality of service providers associated with the retirement plans, comprising the steps of

identifying a plurality of fee sources and an amount of fees associated with each fee source for each of the service providers, and

for each of the service providers, normalizing the amount of fees associated with each fee source;

d. determining from the cost data via the processor a cost component associated with each of the retirement plans and for each service provider, comprising the steps of

determining a plurality of complexity metrics comprising a plan complexity score associated with a plurality of plan design features,

determining a plurality of plan and participant services metrics comprising an overall services score to quantify an amount of work associated with a plurality of plan-driven services and/or a plurality of participant-driven services provided to the retirement plans by each of the service providers,

determining a plurality of accuracy metrics to quantify an accuracy of execution of agreed upon services by each of the service providers associated with the retirement plans, and

determining a plurality of timeliness metrics to quantify a timeliness of execution of agreed upon services by each of the service providers associated with the retirement plans;

e. determining from the value data via the processor a value component associated with each of the retirement plans and for each service provider, comprising the steps of

determining a plurality of participant success metrics to quantify preparedness for retirement by participants of the retirement plans, and

determining a plurality of fiduciary support metrics to quantify an amount of fiduciary oversight and best practices support provided to the retirement plans by each of the service providers;

f. assembling, via the processor, a comparison group from among the plurality of retirement plans; and

g. providing, via the processor, a comparison of the fee component, the cost component, and the value component associated with a selected retirement plan to the fee component, cost component, and the value component associated with the comparison group.

2. The method of claim 1, wherein the service provider is a Recordkeeper.

3. The method of claim 1, wherein the service provider is a Third Party Administrator.

4. The method of claim 1, wherein the service provider is an Advisor.

5. The method of claim 1, wherein the service provider is an Investment Manager.

6. The method of claim 1, wherein the fee sources associated with a plan-driven fee component include investment fees.

7. The method of claim 1, wherein the fee sources associated with a plan-driven fee component include commissions.

8. The method of claim 1, wherein the fee sources associated with a plan-driven fee component include Finder'"'"'s fees.

9. The method of claim 1, wherein the fee sources associated with a plan-driven fee component include Managed Account fees.

10. The method of claim 1, wherein the fee sources associated with a plan-driven fee component include Other fees.

11. The method of claim 1, wherein the fee sources associated with a plan-driven fee component include amounts credited to an ERISA spending account.

12. The method of claim 1, wherein normalizing the amount of fees associated with each fee source includes aggregating the amount of fees associated with a plan-driven fee component, and dividing the aggregated amount of fees by a total amount of assets associated with the selected retirement plan.

13. The method of claim 1, wherein normalizing the amount of fees associated with each fee source includes identifying a unit cost per occurrence for fee sources associated with a participant-driven component.

14. The method of claim 1, wherein the fee sources associated with a participant-driven fee component include annual per participant advice fees.

15. The method of claim 1, wherein the fee sources associated with a participant-driven fee component include loan origination fees per occurrence.

16. The method of claim 1, wherein the fee sources associated with a participant-driven fee component include annual loan maintenance fees.

17. The method of claim 1, wherein the fee sources associated with a participant-driven fee component include hardship approval fee per occurrence.

18. The method of claim 1, wherein the fee sources associated with a participant-driven fee component include QDRO approval fees per occurrence.

19. The method of claim 1, wherein the fee sources associated with a participant-driven fee component include QDRO processing fees per occurrence.

20. The method of claim 1, wherein the fee sources associated with a participant-driven fee component include periodic payment processing fees per occurrence.

21. The method of claim 1, wherein the fee sources associated with a participant-driven fee component include non-periodic payment processing fees per occurrence.

22. The method of claim 1, wherein determining the plurality of complexity metrics comprises the steps of

assigning a maximum cost impact factor to each of the plan design features, and

for each retirement plan by service provider, summing the maximum cost impact factor associated with each of the plan design features.

23. The method of claim 1, wherein the plan design features include plan eligibility features.

24. The method of claim 1, wherein the plan design features include employee contribution features.

25. The method of claim 1, wherein the plan design features include employer contribution features.

26. The method of claim 1, wherein the plan design features include investment features for participants.

27. The method of claim 1, wherein the plan design features include plan distribution features to participants.

28. The method of claim 1, wherein the overall service score is determined by

identifying a frequency with which each of a plurality of services associated with the plan-driven services and/or the participant-driven services is provided by each of the service providers,

assigning a difficulty factor to each of the services,

multiplying the difficulty factor by the frequency for each of the identified services to obtain a product, and

summing the product for each of the services.

29. The method of claim 1, wherein the plurality of participant success metrics includes a participant participation rate.

30. The method of claim 1, wherein the plurality of participant success metrics includes an average deferral percentage for non-highly compensated employees.

31. The method of claim 1, wherein the plurality of participant success metrics includes an average deferral percentage for highly compensated employees.

32. The method of claim 1, wherein the plurality of participant success metrics includes a percent of participants maximizing an employer matching feature.

33. The method of claim 1, wherein the plurality of participant success metrics includes a percent of plan assets in automatically diversified options.

34. The method of claim 1, wherein the plurality of participant success metrics includes a percent of eligible participants making a catch-up contribution.

35. The method of claim 1, wherein the plurality of participant success metrics includes a percent of participants using an auto-rebalance feature.

36. The method of claim 1, wherein the plurality of participant success metrics includes a percent of terminated participants electing not to take, withdraw or transfer assets.

37. The method of claim 1, wherein the plurality of participant success metrics includes a percent of participants with a personal retirement goal.

38. The method of claim 37, wherein the plurality of participant success metrics includes a percent of participants on track to achieve the personal retirement goal.

39. The method of claim 1, wherein the plurality of fiduciary support metrics includes supported plan design and administration features, plan communications features, plan investment features, plan fees features, and plan company stock features.

40. The method of claim 1, wherein the plurality of accuracy metrics includes a plurality of accuracy standards for executing the agreed upon services.

41. The method of claim 1, wherein the plurality of timeliness metrics includes a plurality of timeliness standards for executing the agreed upon services.

42. The method of claim 1, wherein assembling a comparison group includes

identifying characteristics from among the fee component, the cost component, and the value component associated with the selected retirement plan that correspond to a plurality of factors, and

identifying which of the plurality of retirement plans have characteristics that correspond to each of the factors and which are identical to the identified characteristics of the selected retirement plan or which correspond to a predefined range bracketing the identified characteristics of the selected retirement plan.

43. A method of evaluating a retirement plan, comprising the steps of:

a. receiving data corresponding to a plurality of retirement plans;

b. storing the data in memory on at least one web-accessible computer;

c. determining from the data, via a processor associated with the at least one web-accessible computer, a fee component associated with each of the retirement plans and for each of a plurality of service providers associated with the retirement plans, comprising the steps of

identifying a plurality of fee sources and an amount of fees associated with each fee source for each of the service providers, and

for each of the service providers, normalizing the amount of fees associated with each fee source;

d. determining from the data via the processor a cost component associated with each of the retirement plans and for each service provider, comprising the step of

determining a plurality of complexity metrics, a plurality of plan and participant services metrics, a plurality of accuracy metrics, and/or a plurality of timeliness metrics,

e. determining from the data via the processor a value component associated with each of the retirement plans and for each service provider, comprising the step of

determining a plurality of participant success metrics, and/or a plurality of fiduciary support metrics;

f. assembling, via the processor, a comparison group from among the plurality of retirement plans; and

g. providing, via the processor, a comparison of the fee component, the cost component, and the value component associated with a selected retirement plan to the fee component, cost component, and the value component associated with the comparison group.

44. A method of evaluating a retirement plan, comprising the steps of:

a. receiving data corresponding to a plurality of retirement plans;

b. storing the data in memory on at least one web-accessible computer;

c. determining from the data, via a processor associated with the at least one web-accessible computer, a fee component, a cost component, and a value component associated with each of the retirement plans and for each of a plurality of service providers associated with the retirement plans;

d. assembling, via the processor, a comparison group from among the plurality of retirement plans;

e. providing, via the processor, a comparison of the fee component, the cost component, and the value component associated with a selected retirement plan to the fee component, cost component, and the value component associated with the comparison group; and

f. delivering via the processor and via email to a user at least one report comprising the comparison.