401k Investment Fees Decline as Total Plan Fees Remain Flat or Increase

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Feb 24, 2015, 09:37 ET

BALTIMORE, Feb. 24, 2015 /PRNewswire/ -- The average total plan cost for a small retirement plan (50 participants/$2,500,000 assets) remained flat at 1.44% over the past year, while underlying investment fees declined according to the newly released 15^th Edition of the 401k Averages Book.

"Although total plan costs remained flat or increased by a basis point for the majority of plan sizes, we saw a year over year decline for eight of the nine investment categories we track. For example, Large US Equity fees declined from 1.40% to 1.38% and Target Date Funds from 1.35% to 1.32%," said David Huntley, co-author of the 401k Averages Book. As 401k balances reach new highs, participants' exposure to equities and target date funds has increased. "Traditionally US equities, target date funds and international have higher expenses than fixed income and stable asset so the shift from one to the other resulted in total plan costs remaining flat," Huntley said.

The trend was similar for large retirement plans (1000 participants/$50,000,000 assets) with total plan costs flat at 1.03% and underlying investment fees declining. The study shows Large US Equity fees declined from 1.05% to 1.03% and Target Date Funds from 0.98% to 0.96% for large retirement plans. "Plans have been successful at driving down investment expenses by changing share classes or prudence in the selection process," said Joseph Valletta, co-author of the 401k Averages Book.

Wide Range between Low and High Cost Providers

The range between the high and low total plan costs on a small plan is .43% to 1.88%, while a large plan is 0.31% to 1.38%. "The range of costs has narrowed over the years but sponsors still need to examine their fees and understand where they fit in the spectrum of total plan costs," says Valletta.

About 401k Averages Book

Published since 1995, the 401k Averages Book (www.401ksource.com) is the only resource book available for non-biased, comparative 401k average cost information. It's designed to provide financial professionals with essential 401k cost information needed to determine if their 401k plan costs are above or below average. The 15^th 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.

Contact: Joseph W. Valletta, CFA

www.401ksource.com

Phone: (443) 901-7612

E-mail: [email protected]

SOURCE 401k Averages Book