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

Roughly three-fifths of Americans agree on higher taxes for large corporations, higher-income households
Roughly three-fifths of Americans agree on higher taxes for large corporations, higher-income households

Pew survey reveals slight majority consensus on tax rates, but views splinter based on political alignment and income levels.

The Fed's going to cut rates
The Fed's going to cut rates

While the Federal Reserve's decision to hold interest rates steady in March was widely expected, it's the reactions from financial professionals that provide a more nuanced picture of the central bank's approach.

Ontario Pension Fund revamps PE business in light of global risk
Ontario Pension Fund revamps PE business in light of global risk

The pioneering member of Canada's Maple Eight is stepping back from its go-it-alone private equity approach as a drought in deals and Trump's trade war prompt a rethink.

Raymond James, RBC reel in UBS advisors managing over $690M in assets
Raymond James, RBC reel in UBS advisors managing over $690M in assets

The firms' latest additions in Florida and Nevada come as a strategic change at UBS raises risk of advisor defections.

Assetmark debuts new advisor succession planning program
Assetmark debuts new advisor succession planning program

The new program offers opportunities and events structured for rookies, next-gen advisor leaders, and soon-to-exit veterans.

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies