Total costs for 401(k)s, once again, declined for both small and large retirement plans, with investment fees leading the decline — though smaller plans are still paying slightly more.
This is according to the 23rd edition of the 401k Averages Book, which reveals that total investment costs declined between 0.02%-0.05% from last year, with the average representing a decrease of 0.03%.
“Investment related fees, which are paid by participants, continued to decline in 2022. The benefits of the trend in lower investment fees will pay significant dividends to participant balances in the long run,” states book author Joseph W. Valletta.
Not surprisingly, smaller plans are still paying slightly more in fees than larger plans. According to the data, a small plan with $5 million in assets costs 1.09%, while a plan with $50 million in assets is 0.81%. Since 2018, small plan total plan costs have dropped 0.08% from 1.17%.
Among the book’s key findings:
Large 401(k) plan fees: Large retirement plan (1,000 participants/$50 million in assets) fees declined from 0.88% to 0.85% over the past year and are down from 0.95% in 2017.
Small 401(k) plan fees: Small retirement plan (50 participants/$5 million in assets) fees declined from 1.12% to 1.09% over the past year and are down from 1.18% in 2017.
Plans with smaller average account balances pay more than those with larger balances: A $20 million plan with 2,000 participants has an average total plan cost of 1.17%, while a $20 million plan with 200 participants has an average total plan cost of 0.91%.
Investment fees continue to decline: All scenarios saw a year-over-year decrease in total investment costs ranging between 0.02%–0.05%, with the average representing a decrease of 0.03%.
Wide range between high and low-cost providers: The range of cost is greatest within the small plan market. The range of a plan with $1 million in assets and 100 participants ($10,000 average account balance) is 0.69% to 2.67%.
“We are encouraged to see fees continue to decline for participants in small 401(k) plans,” added Valletta. “Small business employers have a lot on their plate with deciphering SECURE 2.0, but small tweaks to their plan’s investment menu and fees can generate significant savings for their employees.”
Published since 1995, the 23rd edition of the 401k Averages Book is available for $95 and can be purchased by calling 888-401-3089 or online at www.401ksource.com.
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