Investment Fees Dip for Small and Large Plans

The report reveals a year-over-year decline for eight of the nine investment categories tracked for small retirement plans, with large U.S. equity fees declining from 1.40% to 1.38% and target-date funds dropping from 1.35% to 1.32%. For large retirement plans, 2014 fee averages declined from 1.05% to 1.03% for large U.S. equity and from 0.98% to 0.96% for target-date funds. 

Despite the positive fee findings, the average total plan cost for small and large retirement plans remained flat last year, with small plans (50 participants and $2.5 million in assets) at a 1.44% average annual cost and large plans (more than 1,000 participants with at least $50 million) at 1.03%.

“Plans have been successful at driving down investment expenses by changing share classes or prudence in the selection process,” says Joseph Valletta, co-author of the 401k Averages Book.

There is a significant difference between low- and high-cost providers, as the total plan costs for a small plan range from 0.43% to 1.88%, while the range for 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,” adds Valletta.

The 15th edition of the 401k Averages Book includes data updated through September 9, 2014, and is available for purchase at a price of $95 by calling (888) 401-3089 or visiting www.401ksource.com.