The average total plan cost and average investment expenses for 401(k) retirement plans fell slightly in 2012, according to the newly published 13th edition of the 401k Averages Book, an annual overview of plan benchmarks.
The study revealed that in 2012:
- The average total plan cost—including administrative and record-keeping fees—for a small 401(k) plan (50 participants/$2,500,000 assets) declined from 1.47 percent to 1.46 percent. These fees are calculated as a percentage of assets under management in the plan.
- Small plan average investment expenses—the expense ratios charge by mutual funds for assets held within the plan—went from 1.38 percent to 1.37 percent.
- The average total plan cost for a large retirement plan (1,000 participants/$50,000,000 assets) declined from 1.08 percent to 1.03 percent.
- Large plan average investment expenses declined from 1.05 percent to 1.00 percent.
Expanded Fee Disclosure
"401(k) fees have been trending down over the years but the Department of Labor's fee disclosure regulations, which took effect in 2012, helped bring a great deal of attention to 401(k) plan fees," said Joseph Valletta, co-author of the study, in a media release. "More plan sponsors and their advisors recognize the importance of plan fees and the wide range of fees in the marketplace. The average total expense for a small plan is 1.46 percent, but the range between the high and low total plan expense is .38 percent to 1.97 percent."
Target-Date vs. Balanced Funds
Target-date fund use continues to grow in 401(k) plans; for the first time, the study separated target-date funds from traditional balanced and risk-based funds. Among the findings:
- The average target-date fund expense for a small plan was 1.37 percent, while the balanced fund average was 1.45 percent.
- The average target-date fund expense for a large plan was .98 percent, while the balanced fund average was 1.12 percent.
Target-Date Funds Claim Growing 401(k) Market Share, SHRM Online Benefits, December 2012
401(k) Fee Disclosures: A Top 10 List of Issues, SHRM Online Benefits, July 2012
Generation Y Favors Target-Date Funds and Roth 401(k)s, SHRM Online Benefits, August 2012
High 401(k) Plan Fees Can Deplete Retirement Savings, SHRM Online Benefits, March 2010
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