The new edition of the 401k Averages Book reveals that 401(k) total plan costs declined for both small and large retirement plans, with investment fees leading the decline, though smaller plans are still paying slightly more in fees.
According to the 21st edition of the book, the average total plan cost for a small retirement plan—those with a range of 100 participants and $5 million in assets—declined from 1.23% to 1.20% over the past year.
Meanwhile, the average total plan cost for a large retirement plan—those with a range of 1,000 participants and $50 million in assets—declined from 0.91% to 0.90%.
“Even as 401(k) fees continue to decline the industry saw new fee litigation cases explode in 2020. 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),” stated Joseph W. Valletta, author of the 401k Averages Book. “Fee benchmarking is an important piece of the 401k governance process and the Averages Book is designed to help employers and their advisors with this step,” he adds.
Investment fees, which are typically paid by participants, also continued to decline, according to the report. It notes that 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%.
As for smaller plans paying higher fees than large plans, the report shows that the small plan with $5 million in assets costs 1.20%, while the plan with $50 million in assets is 0.90%.
What’s more, the report notes that 401(k) total plan costs declined for most size plans. In 23 of 24 scenarios, a decrease was seen in total plan costs from last year, while the other one remained unchanged.
There also was a wide range between high- and low-cost providers. According to the report, the range of cost is greatest within the small plan market. For instance, the range of a plan with $1 million in assets and 100 participants with a $10,000 average account balance is 0.68% to 2.73%.
Published since 1995, the 21st edition of the 401k Averages Book is available for $95 and can be purchased by calling 888-401-3089 or at www.401ksource.com.