What could a defined benefit (DB) plan fee analysis uncover for your organization?
Managing a DB plan across multiple providers can strain internal teams and budgets. Many plan sponsors don’t realize they may be overpaying for plan administration and investment fees—especially as DB plan allocations shift toward fixed-income strategies. Coordinating separate providers for recordkeeping, actuarial, and trust services can also increase complexity and risk. A comprehensive fee analysis in this example uncovered more than $600,000 in potential annual savings—simply through thoughtful consolidation.
Midwest-based utilities provider
$400M DB plan assets
Plan closed to new entrants, with frozen accruals
~4,100 participants across all statuses (active, term-vested, and retirees)
97% DB plan funded status
Allocation: 40% return-seeking; 60% liability driven investments (LDI)
While focused on long-term de-risking, the plan sponsor realized they were dedicating too many internal resources to plan coordination. Multiple providers made it difficult to manage timing, consistency, and costs—particularly around investment fees, despite a shift toward more fixed-income exposure.
Separate providers for recordkeeping and actuarial services
Two asset management firms for investments
One provider for trust and custody services
Principal® conducted a side-by-side cost and service review across the plan’s key functions. The analysis uncovered opportunities to streamline services, reduce fees, and alleviate internal burden. Importantly, with a highly customized investment approach, we were able to identify opportunities for saving on costs, time, and resources.
Key findings:
Recordkeeping and actuarial fees could be reduced
Investment fees were misaligned with the plan’s fixed-income strategy
Consolidation to a single service provider could improve efficiency and reduce timing risks by aligning data and decision-making
By consolidating pension service providers, the plan sponsor continued its highly customized investment strategy while lowering costs.
| Service |
|
|
|---|---|---|
| Before | After consolidation | |
| Recordkeeping | $258,000 | $208,000 |
| Actuarial | $69,000 | $55,000 |
| Investment/Advisory costs | $1,300,000 | $750,000 |
| Trust and custody | $68,000 | $60,000 |
| Total | $1,695,000 | $1,073,000 |
| Annual service savings |
|
|
For illustrative purposes only.
Beyond the cost reductions, the plan sponsor improved risk alignment by combining recordkeeping, actuarial, and investment management services. With a single provider leveraging real-time plan and participant-level data, they gained more effective timing coordination and liability hedging capabilities.
A comparative fee analysis can help identify inefficiencies, quantify potential savings, and support a more integrated and efficient pension strategy.
