LoVasco Briefing Episode 3: Benchmarking Isn’t About Finding the Cheapest Option

When most employers hear the term “benchmarking” in relation to their retirement plans, their minds immediately go to one thing: fees.

Are our fees too high?

Can we lower them?

Are we paying more than we should?

Those are fair questions. In fact, under ERISA, they’re important questions. But in Episode 3 of The LoVasco Briefing, Jim Chapman and I unpacked a reality that many plan sponsors overlook:

Benchmarking is not just about cost. In fact, focusing solely on cost can sometimes create entirely new fiduciary and operational risks. As Jim explained early in our conversation:

“Selecting and benchmarking your service providers is gonna go well beyond fees… identifying who’s going to best serve your population and your team, I think is a lot more important than just having the lowest costs.”

That distinction matters, because retirement plans don’t exist in a vacuum. They operate inside real organizations with real employees, varying levels of administrative support, different workforce demographics, and different operational complexities.

And that means the “cheapest” solution is not always the most prudent one.

Watch the entire episode to consider this scenario and to learn what you should be doing now to avoid serious issues later: “If you called your advisor today and asked for your fiduciary file, what would they hand you?”

COMING SOON: “The Governance Gap”  

A Live Fiduciary Governance Training for Plan Sponsors and Executives

In this upcoming live fiduciary training, LoVasco’s Retirement Plan Consulting team will walk through what fiduciary governance actually looks like…and why many plan sponsors are carrying more responsibility than they realize.

LEARN MORE AND REGISTER HERE >>

How Benchmarking Became Synonymous with Fees

There’s a reason the industry became hyper-focused on costs. Over the last decade, ERISA litigation has increasingly centered around excessive fees, improper share classes, and failures to properly benchmark plan expenses. As a result, many employers internalized a simplified version of fiduciary oversight: Lower fees = better governance.

But that’s not actually what ERISA says. In fact, ERISA requires fees to be “reasonable”...not necessarily the absolute lowest possible. That nuance is critically important.

As Jim explained during the discussion, “reasonable” is inherently contextual. A slightly more expensive provider may absolutely be the prudent choice if they deliver materially better service, administrative support, participant engagement, or operational capabilities.

The key is not the outcome alone. The key is whether the committee deliberated thoughtfully and documented the rationale behind the decision.

That theme should sound familiar by now. Just as we discussed in Episodes 1 and 2, fiduciary defensibility almost always comes back to process.

The Hidden Risk of Chasing the Lowest Cost

One of the most revealing moments in the episode came when Jim shared an example of a company that insisted on selecting the absolute cheapest recordkeeping provider possible. Initially, it appeared to be a win. Costs dropped. Fees looked better on paper. Everyone felt like they had made a financially responsible decision.

Until the operational reality set in.

When issues arose, there was no dedicated support team. Questions went to generic inboxes. Support meant calling a 1-800 number. Even basic services, like annual match calculations, turned out to be excluded from the stripped-down package they had selected.

What looked efficient on a spreadsheet quickly became frustrating…and ultimately more costly.

That example illustrates a broader truth: retirement plans are operational systems, not just investment accounts.

When employers choose providers based solely on price, they often overlook questions like:

• How responsive is the provider? ‍
• How strong is their payroll integration? ‍
• What administrative responsibilities do they assume? ‍
• How well does the participant experience fit the workforce? ‍
• How much strain will this place on internal HR or finance teams?

Those questions matter because operational failures create real fiduciary exposure.

As Jim pointed out, if lean internal teams are forced to manually manage too many plan functions, the likelihood of operational errors, compliance failures, and delayed filings rises dramatically.

And those mistakes are almost always more expensive than paying slightly more for the right support structure upfront.

The Difference Between Price and Value

One of the core themes of the episode was the distinction between price and value. Price is what you pay. Value is what you receive in return. That applies to every major service provider connected to a retirement plan:

• recordkeepers
• third-party administrators
• investment managers
• fiduciary advisors

For example, some employers may benefit enormously from providers offering robust payroll integrations, participant communication tools, mobile-first experiences, or 3(16) administrative support that removes operational burdens from internal teams. Others may place a higher premium on employee financial wellness resources, on-demand education, proactive consulting, or outsourced fiduciary coordination.

The point is this: Benchmarking should evaluate whether the plan is receiving appropriate value for the fees being paid—not simply whether the fees are low.

As Jim put it: “What are you getting out of the relationship for what you’re paying?”  

That is a far more sophisticated—and fiduciary-sound—question than simply asking who is cheapest.

Why Independent Benchmarking Matters

Another major topic in the episode was independence. Because not all benchmarking is truly objective…

If a provider is benchmarking their own fees, their own proprietary investments, or their own service model, there is an inherent conflict of interest, even if the people involved are acting in good faith.

Jim and I discussed how many recordkeepers provide “benchmarking” reports that compare their pricing favorably against the market while simultaneously retaining revenue-sharing arrangements and proprietary fund structures that make true comparisons difficult.

That’s why independent benchmarking matters. A prudent process should evaluate:

• recordkeeping fees
• administrative fees
• advisory fees
• investment management fees

Separately.

And those evaluations should rely on independent third-party benchmarking data whenever possible. That transparency becomes especially important when revenue sharing, proprietary funds, or bundled pricing structures are involved—areas where costs can easily become obscured.

As Jim explained, some plans are told they are “free” simply because fees are hidden inside investment expense ratios rather than clearly disclosed as line-item costs.

That may feel simpler. But it is rarely a best practice.

Benchmarking Should Lead to Better Decisions—Not Automatic Change

One important misconception we addressed is the idea that benchmarking automatically means changing providers. It doesn’t. In many cases, a prudent benchmarking exercise simply leads to renegotiation, service improvements, or better accountability.

Sometimes the current provider remains the best fit after costs are adjusted or service issues are addressed. Other times, benchmarking reveals deeper governance gaps that justify a broader evaluation or full RFP process. But the purpose of benchmarking is not to create disruption for the sake of disruption.

The purpose is to ensure the plan is operating in the best interests of participants and that fiduciaries can document why decisions were made. That’s the standard.

The Real Question Plan Sponsors Should Ask

Toward the end of the conversation, I asked Jim what the very first gut-check question a plan sponsor should ask themselves is if they’re unsure whether they’re truly protected as fiduciaries. His answer was simple:

If you called your advisor today and asked for your fiduciary file, what would they hand you?

Would they provide:

• Meeting minutes?
• Documentation of deliberation?
• Benchmarking analyses?
• An Investment Policy Statement?
• Committee charters?
• Evidence of a prudent process?

Or would the answer simply be a quarterly investment report and a customer service number?

That distinction says a lot. Because true fiduciary oversight is not about having data; it’s about having defensible governance.

Join Us for “The Governance Gap,” a Live Training on June 29th

This episode is part of a larger conversation we’ve been building throughout The LoVasco Briefing series around fiduciary responsibility, governance, benchmarking, and employee financial wellness.

On June 29th, we’ll be bringing these ideas together in a live training session designed specifically for employers, plan sponsors, HR leaders, and retirement plan committee members:

“The Governance Gap”  - A Live Fiduciary Governance Training for Plan Sponsors and Executives

LEARN MORE AND REGISTER HERE >>

If these conversations have raised questions about your own plan, or made you realize there may be gaps in your current oversight process, we’d encourage you to join us.

During the training, we’ll go deeper into:

• fiduciary governance structures
• benchmarking best practices
• hidden fee and conflict issues
• operational oversight
• financial wellness strategy
• what regulators are actually looking for

And most importantly, we’ll help plan sponsors understand what a defensible fiduciary process actually looks like in practice. We hope to see you there!