To Cut 401(k) Costs, Look at Investment Expenses

The 11th Edition of the 401k Averages Book illustrates that the average total plan cost for a small retirement plan (100 participants) is 1.33%, while the average total plan cost for a large retirement plan (1,000 participants) is 1.11%. The study shows the small plan average investment expense is 1.26%, while the large plan average investment expense is 1.09%. According to a press release, investment expenses account for 95% of the small plan’s total expenses and 98% of the large plan.   

“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, in the press release.  

The range between the high and low total plan costs on a 100 participant plan with a $50,000 average account balance is .57% to 1.76%.  The 11th Edition provides sixteen quartile charts to help plan sponsors and their advisers see whether their costs fit in the first, second, third or fourth quartile. The range between the 25th percentile and 75th percentile for the small plan universe is 1.18% to 1.49%.