401(k) Fees Continue to Decline; Assets Concentrated in Larger Plans

The latest edition of the 401k Averages Book estimates that fees for the average small plan (50 participants and $2.5 million) dropped slightly over the last year, from 146 BPs to 144. Larger plans (1,000 participants and $50 million) remained flat at 103 BPs. Micro plans (10 participants and $500,000) were at 190 BPs, but since this is the first year their fees were tracked, no comparable data from previous years are available.

According to research on mega plans by NEPC, their fees dropped from 55 BPs in 2012 to 53 BP in 2013. The range of the middle 50% of small plans dropped from 39 to 26 BPs, driven by fee disclosure, with larger plans remaining flat.

Meanwhile, a Judy Diamond analysis based on Form 5500 data indicates that there are now 500,000 401(k) plans with $3.5 trillion in assets. (A Q3 2013 ICI estimate pegged the asset total at $4.0 trillion.) Of those 500,000 plans, however, 71% of the assets are controlled by 1% of the companies — with 0.2% controlling almost half. The analysis projects that the industry will see a shift in investment options, probably to alternatives, driven by these larger plans.

Add Your Comments

One Comment

  1. Joseph Gordon
    Posted February 19, 2014 at 12:30 pm | Permalink

    Rather being nimble and quick, our small plan and mid-size plans have already embraced alternatives, however, the definition of what an alternative is varies by many.
    Some think TIPs and real estate are traditional alternatives; others say more traditional hedge fund strategies are true alternatives such as long/short equity, managed futures, global macro, convertible arb, event driven, and even long-short credit.
    I think plans will be better served, regardless of size, to have a default alternative, whether managed account, TDFs, or risk based models which incorporate these strategies, as opposed to thinking a participant will know what to do on their own. They won’t in 99% of the cases IMHO!

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