The average total plan cost for a small retirement plan (100 participants/$5 million in assets) declined from 1.25 percent to 1.24 percent over the past year, according to the latest release of the 401k Averages Book, 19th Edition.
The average total plan cost for a large retirement plan (1,000 participants/$50 million in assets) declined from 0.95 percent to 0.93 percent.
The 401k Averages Book also shows smaller plans pay higher fees than large plans.
The small plan with $5 million in assets costs 1.24 percent, while the plan with $50 million in assets is 0.93 percent.
“Overall fee disclosure and greater transparency has helped drive down 401k fees,” Joseph Valletta, author of the 401k Averages Book, said in a statement. “But what we continue to find is large plans, with larger average account balances, pay less than smaller plans. People in the industry understand this but I doubt participants of smaller companies are aware of this gap.”
Investment fees continue to decline
All scenarios (except one) saw a year over year decrease in total investment costs of between 0.01 percent and 0.03 percent. Larger plans led the way, experiencing greater decreases. These fees are typically paid by participants.
401k total plan costs declined for most size plans
Fully 19 of 24 scenarios saw a decrease in total plan costs from last year, while the other five remained unchanged.
The amount of revenue sharing paid by a plan is impacted by its size
Average revenue sharing, which can be used to pay for recordkeeping and advisor compensation, can be as high as 1.19 percent for the smallest plans and as low as 0.16 percent for larger plans.
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 0.72 percent to 2.81 percent.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
