With Fidelity reporting that average 401k account balances reached the six-figure range for the first time in 2017, it’s fitting that the newest 401k Averages Book has added a section to address the milestone.
And, as expected, the book indicates that plans with higher average account balances pay lower total fees.
For instance, a plan with $1,000,000 in assets and 10 participants ($100,000 average account balance) has a total cost of 1.47 percent; a $1,000,000 plan with 100 participants ($10,000 average account balance) has a total cost of 1.89 percent.
Other key findings this year include:
- 401k total plan costs declined for most size plans: Scenarios with 200 or more participants saw a decrease in total plan costs from last year.
- Investment fees continued to decline: Scenarios with 200 or more participants saw a year over year decrease in total investment costs of between 0.01 percent to 0.03 percent.
- 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 $1,000,000 in assets and 100 participants ($10,000 average account balance) is 0.72 percent to 2.80 percent.
The 18th edition of the publication outlines data for plans with average account balances of $10,000, $50,000 and $100,000.
Each of these three sections is divided into eight subsections of various plan size scenarios based on the number of participants and total assets.
From there, information is provided about total plan cost, amount of revenue sharing generated, quartiles of cost and more.
“The average account balance is going to be one of the biggest drivers in 401k pricing,” said Joseph Valletta, co-publisher of the book. “Whether you’re new to the retirement world or an experienced advisor, benchmarking should be part of your practice. The information provided in this iteration will allow advisors to accurately benchmark their clients’ and prospects’ plans in order to help them better meet their fiduciary responsibilities.”