January 17, 2012
--- The average total plan cost for a small 401(k)
plan (100 participants) is 1.3%. ---
According to the 12th Edition of the "401k Averages Book," the average total plan cost for a
large retirement plan (1,000 participants) is 1.08%. The study shows the small
plan average investment expense is 1.24%, while the large plan average investment
expense is 1.05%.
"With the DoL's fee disclosure effective date set
for April 1, knowing if your 401(k) plan fees are reasonable will
be very important," says Joseph Valletta, co-author of the "401k Averages Book."
The recent focus on investment expenses is well-reasoned
because the study finds investment expenses account for 95% of the small plan's
total expenses and 98% of the large plan, according to the authors. "If an
employer really wants to cut their 401(k) costs, they need to examine their
investment-related expenses," said David Huntley, co-author of the "401k Averages Book."
The range between the high and low total plan costs on a 100-participant
plan with $50,000 average account balance is .36% to 1.71%.
all the focus on fee disclosure and 408(b)(2), it's important employers and
their advisers compare their fees to a benchmark and understand where they fit
into the range of costs in the marketplace," said Huntley.
The12th Edition breaks down investment costs and identifies
the revenue sharing and net investment amounts. The study finds the
average revenue sharing amount
on a small plan is .68%, while the net investment cost is .56%.
is causing some plan sponsors and their advisers to take a more detailed look
at how their investment costs are allocated," said Valletta.
Published since 1995, the "401k Averages Book" is the only resource book
available for non-biased, comparative 401(k) average cost information. It's
designed to provide financial professionals and plan sponsors with essential
401(k) cost benchmarking information. The 12th Edition of the "401k Averages Book" is available for $95 and can
be ordered at www.401ksource.com.
Advisers can purchase
an annual individual Advisor License, which
allows them use the data in their client reports.