A bit of good news after a horrible year. The latest edition of the 401k Averages Book 21st Edition, found that 401(k) fees declined in 2020, with the average total plan cost for small retirement plans (100 participants, $5 million in assets) dropping from 1.23% to 1.20%, and large retirement plans (1,000 participants, $50 million in assets) decreasing from 0.91% to 0.90%.
“Even as 401(k) fees continue to decline the industry saw new fee litigation cases explode in 2020,” Joseph W. Valletta, the book’s author, said in a statement. “This may be why many studies are showing a majority of employers are looking to review/benchmark their plan fees in 2021, while others are considering vehicles such as Pooled Employer Plans (PEPs). Fee benchmarking is an important piece of the 401(k) governance process and the Averages Book is designed to help employers and their advisors with this step.”
Key Findings
- Investment fees continue to decline: All scenarios saw a year-over-year decrease in total investment costs ranging between 0.02%-0.04%, with the average representing a decrease of 0.03%.
- Smaller plans pay higher fees than large plans: The small plan with $5 million in assets costs 1.20%, while the plan with $50 million in assets is 0.90%.
- 401(k) total plan costs declined for most size plans: 23 of 24 scenarios saw a decrease in total plan costs from last year, while the other one remained unchanged.
- Wide range between high and low-cost providers: The range of cost is greatest within the small plan market. The range of a plan with $1 million in assets and 100 participants ($10,000 average account balance) is 0.68% to 2.73%.
Published since 1995, the 401(k) Averages Book is the only resource book available for non-biased, comparative 401(k) average cost information. It’s designed to provide financial professionals with essential 401(k) cost information needed to determine if their 401(k) plan costs are above or below average. The 21st Edition of the 401(k) Averages Book is available for $95 and can be purchased by calling (888) 401-3089 or online at http://www.401ksource.com.