A new industry survey finds a drop in record keeping fees and revenue sharing.
The survey noted the growing appeal of record keeping fee structures based on a fixed-dollar amount per plan participant, which were now found among nearly half (47%) of the 113 plans included in the NEPC 2015 Defined Contribution Plan & Fee Survey. Additionally, the survey’s authors noted that this is increasingly prevalent among what they termed “mid-size” plans, those with $100 million to $500 million in assets, and 43% of those arrangements were contracted in the past three years. However, of the 47%, more than half (52%) have $1 billion or more in plan assets, and 24% have no revenue sharing. In other words, 87% of plans have some level of revenue sharing.
The survey also noted that among survey respondents, the median record keeping fee was $64 for each plan participant in 2015, compared with $70 a year earlier. In NEPC’s 2007 edition of the survey, the estimated annual cost of administration was $118.
In 2015, the median estimated plan fees for employer respondents stood at 0.46%, compared with 0.52% in 2014. Perhaps not surprisingly, in view of the proportion of plan fees they represent, the weighted average expense ratio totaled 0.46% in this year’s survey, compared with 0.49% a year earlier. In 2006, when NEPC first conducted this survey, the weighted average expense ratio stood at 0.57%.
NEPC’s findings also show that 58% of plans in the survey have what they call plan expense reimbursement accounts (PERA), accounts that facilitate the capture of dollars in excess of pre-determined recordkeeping fees and use them for other plan expenses.
In that vein, a cautionary note in applying the survey results: NEPC notes that the focus of this year’s survey was on the level of contracted fees as opposed to actual fees paid out since the latter may be offset by PERA balances. Those PERA balances, while generated by plan participants, were not counted toward contracted fee levels. NEPC explains that the prevalence of these offsets and PERAs has helped to reduce the cost per participant (compared to prior years) despite plan assets being at their highest level.
