401(k) Plan Cost Range Is Moderate for Most Employers

By Stephen Miller, CEBS Apr 25, 2011

Total plan costs for running a 401(k) retirement plan can vary, but for most U.S. employers the range between high and low total plan costs is moderate.

For a 401(k) plan with approximately $2 million in assets, the range between high- and low-cost providers averages around 1.33 percent of plan assets, while the range for the middle 50 percent of the universe is just 0.31 percent, according to the 2011 edition of the 401k Averages Book, an annual resource for comparative 401(k) cost information.

"Our data shows that the range between high and low costs can be significant, but most 401(k) plan costs are going to be grouped around the median," said David W. Huntley, co-publisher of the 401k Averages Book.

For example, the range between the high and low cost for a 50 participant plan with $2.5 million in assets is 1.24 percent, while the range for the middle half of the universe is 0.29 percent. The median total plan cost for this plan size is 1.49 percent of plan assets.

Small-Asset Plans Have Greater Cost Disparity

Although similar trends can be observed across all plan sizes, the disparity between high and low costs is greatest for plans with small plan assets but a relatively large number of participants. "Even though the range between high and low total plan costs might be greater for these types of plans, we do see a significant reduction in the range between the middle 50 percent of the universe," said Huntley. For example, the range of total plan costs for a plan with 200 participants and $2 million in assets is 1.48 percent, while the range for the middle 50 percent of the universe is 0.32 percent. The median total plan cost for this plan size is 1.7 percent of plan assets.

Similarly, research by Brightscope.com shows that average 401(k) total plan cost can be as low as 0.20 percent of assets for the largest plans but as high as 5 percent for smaller plans.

"With all the focus on fee disclosure, it's important employers and their advisors compare their fees to a benchmark and understand where they fit into the range of costs in the marketplace," Huntley advised.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related Articles:

Will Fee Disclosure Rule Enlighten Participants?, SHRM Online Benefits Discipline, March 2011

What 401(k) Plans Can No Longer Hide, SHRM Online Benefits Discipline, February 2011

Stephen Miller, CEBS, is an online editor/manager for SHRM.​

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