It’s the $64 gazillion question, and if the recent past is any indication, 401(k) fees are trending down—especially for larger plans. It’s one important finding contained in a comprehensive report released in December from BrightScope and the Investment Company Institute.
The report, titled “The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans,” says that mutual fund fees in 401(k) plans tended to fall between 2009 and 2013.
“Consistent with other research, the study also found that fund expenses are typically lower in larger plans. For instance, the average asset-weighted expense ratio for domestic equity mutual funds was 0.81 percent for plans with $1 million to $10 million in plan assets, compared with 0.44 percent for plans holding more than $1 billion in plan assets,” it reads.
“A variety of factors contribute to the downward trend of both 401(k) total plan costs and the fees of mutual fund in the plans—including continued awareness and focus by plan sponsors and plan participants on the impact of fees on 401(k) savings,” adds Brooks Herman, head of data and research at BrightScope.
Whether measured for the average 401(k) plan, the average participant, or the average dollar, total plan costs also have decreased over time, according to the organizations. For example, total plan cost fell from 1.02 percent of assets in the average 401(k) plan in San Diego-based BrightScope’s database in 2009 to 0.89 percent of assets in 2013. In 2013, the average participant was in a 401(k) plan with a total plan cost of 0.58 percent of assets, compared with 0.65 percent in 2009.
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.
