Size of plan, pay-in rates help lower retirement plan fees, survey says

Lower fees for defined contribution retirement plans are related to factors such as the size of the plan, higher contribution rates by employers and employees, and greater use of automatic enrollment.
APR 14, 2009
Lower fees for defined contribution retirement plans are related to factors such as the size of the plan, higher contribution rates by employers and employees, and greater use of automatic enrollment. Those were the findings of a study released today by the Investment Company Institute and Deloitte Consulting LLP, a subsidiary of Deloitte LLP of New York. The study examined 130 plans that had assets ranging from less than $1 million to more than $500 million, and from less than 100 participants to more than 10,000. It was conducted in November and December. Among factors that can affect fees include the plan sponsor’s relationship with the plan service provider, and allocation of assets to equities, according to ICI. Equity funds tend to be more costly to manage,” according to the study, “Defined Contribution/401(k) Fee Study” The median fee level found in the survey was 0.72% of assets, with the range of fees starting at 0.35% and reaching a high of 1.72%. Primary factors influencing fees are the number of participants in a plan and the average account balance, with larger plans having significant economies of scale, ICI said in a release. “Policymakers, employers, plan service providers and workers all need a better understanding of what plans cost and what factors are the key drivers of plan fees,” Washington-based ICI president and chief executive Paul Schott Stevens said in the statement. ICI cited Department of Labor statistics showing that 62% of 401(k) plans have less than $1 million in assets, but only 4% of all 401(k) assets and 10% of participants are in such small plans. Half of 401(k) plan assets are in plans with more than $500 million in assets, the ICI said. Congress has been examining 401(k) issues, most notably plan fees, which can significantly erode plan participants’ earnings over long periods of time and result in substantially smaller retirement savings and income. Legislation is being considered that would require stricter disclosure rules for 401(k) fees.

Latest News

Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel
Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel

RBC Wealth Management's latest move in New York adds an elite eight-member team to its recently opened Westchester office.

Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints
Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints

Stifel – so far - is on the hook for more than $166 million in damages, legal fees and settlements in investor complaints involving Roberts, a 35-year industry veteran.

iCapital secures $820M in latest funding, hits $7.5B
iCapital secures $820M in latest funding, hits $7.5B

The giant alt investments platform's latest financing led by T. Rowe Price and SurgoCap Partners, along with State Street, UBS, and BNY, will fuel additional growth on multiple fronts.

Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity
Merrill Lynch on the hook for $3.7M after clients claimed sale of unsuitable private equity

Some investors recently have seen million dollar plus decisions by FINRA arbitration panels involving complex products decisions go their way.

What does it take to feel 'financially comfortable' or 'wealthy' in 2025?
What does it take to feel 'financially comfortable' or 'wealthy' in 2025?

New report shines a light on how Americans view wealth today.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.