%0 Journal Article %A Benjamin Goodman %A David P. Richardson %T Assessing Fee Fairness: Characteristics of an Effective Plan Fee Structure %D 2019 %R 10.3905/jor.2019.6.3.023 %J The Journal of Retirement %P 23-33 %V 6 %N 3 %X This article develops a four-part framework for assessing the effectiveness of a retirement plan administrative fee structure. An administrative fee structure should satisfy three efficiency standards: (1) adequacy, (2) transparency, (3) administrative. It should also satisfy (4) a fairness standard based on both horizontal equity—participants with similar levels of assets pay similar levels of fees—and vertical equity—participants with a higher level of assets pay at least the same proportion in fees as those with lower asset balances. Using administrative data from a large plan, we demonstrate that an administrative fee structure charging a flat pro rata fee can satisfy all four standards. By contrast, we show that a pure per capita administrative services fee can satisfy the three efficiency standards but will fail the fairness standard. Indeed, our plan analysis shows that a flat per capita fee is highly regressive, with the lowest-asset participants paying equivalent pro rata fees that may be thousands of times larger than the highest-asset participants. A hybrid fee structure that uses a combination of per capita fees and pro rata fees, or capitates total fees paid by any individual, can reduce the unfairness of a pure per capita fee but will also weaken the efficiency standards because it is more complex to understand and administer.TOPICS: Retirement, portfolio management/multi-asset allocation, legal/regulatory/public policy %U https://jor.pm-research.com/content/iijretire/6/3/23.full.pdf