While the 401k Averages Book has served as a resource for evaluating 401(k) plan fees among large and small plans alike, the newly released 24th edition now includes new benchmarking data on advisor compensation, as well as recordkeeping administration.
In responding to the evolving landscape of retirement plan administration, the recordkeeping data has been broadened to include hard dollar fees, asset-based fees and any allocation from revenue sharing, according to the book’s author.
“This expansion allows for a more nuanced understanding of the cost structures associated with 401(k) plan recordkeeping and administration,” writes Joseph W. Valletta, who is the author of the 401k Averages Book, sponsored by Pension Data Source, Inc.
As to advisor compensation, it shows, perhaps not surprisingly, that compensation as a percentage of assets declines as plan assets increase. For instance, advisor compensation for a small plan with $5 million in assets and 100 participants equals 0.37%, while a plan with $50 million in assets is 0.17%.
For the $5 million/100 participant category, the book further shows the total average plan cost as a percentage of assets at 1.09%, divided between net investment (0.41%), advisor compensation (0.36%), and recordkeeping/administration (0.32%).
Slicing the data down further in illustrating revenue sharing allocation to advisor compensation and recordkeeping/administration, the average plan cost per participant works out to be $206 for net investment costs, $180 for advisor compensation, and $166 for recordkeeping/administration, resulting in a total bundled cost of $552 per participant.
Regarding the expanded definition of recordkeeping administration, the book shows that hard-dollar only recordkeeping fees for a small retirement plan (100 participants with $5 million in assets) in the 23rd edition averaged $47 per participant. In contrast, the current edition with the expanded definition shows an average fee of $165 per participant.
In comparing the costs of two plans with the same amount of total assets—but different levels of participants—plans with smaller average account balances pay more than those with larger balances. For instance, a $20 million plan with 2,000 participants has an average total plan cost of 1.26%, while a $20 million plan with 200 participants has an average total plan cost of 0.84%. “You should take your plan’s average account balance into consideration when you are benchmarking fees,” Valletta suggests.
For a breakdown of even smaller plan 401(k) fees (in this case, 50 participants and $500,000 in assets), the book shows an average total plan cost per participant of $231, with recordkeeping/administration costs leading the way at nearly 44%, followed by revenue sharing (38%) and net investment costs (18%). For these plans, total plan cost as a percent of assets comes in at 2.31% for 2023, up slightly from 2.19% in 2022.
“We are thrilled to release the latest edition of the 401k Averages Book, which reflects our ongoing commitment to delivering important insights into 401(k) plan fees. The addition of advisor compensation and the expanded definition of recordkeeping administration further enhances the depth and usefulness of the Book of Averages,” Valletta said in a statement upon releasing the book.
Published since 1995, the 24th edition of the 401k Averages Book is available for $95 and can be purchased by calling 888-401-3089 or online at www.401ksource.com.
