Report Finds Participant Account Balance Size Influences 401k Plan Fees
BALTIMORE, MD, August 16, 2017 -- According to "Are All $5,000,000 401k Plans Created Equal?", a new report published by the authors of 401k Averages Book, the size of a 401k plan's average participant account balance will influence the amount of fees they pay.
"Our findings indicate the importance of matching your plan's fee benchmark to one that closely represents your plan's average account balance, number of participants, and total assets," said David W. Huntley co-author of the 401k Averages Book.
One of the biggest drivers of a 401k plan's fee is the size of its average account balance. There can be significant pricing differences if the $5,000,000 401k plan has 100 participants as opposed to 500 participants. According to the findings, the total bundled cost for a plan with 100 participants and an average account balance of $50,000 is 1.25 percent as compared to 1.56 percent for a 500-participant plan with an average account balance of $10,000.
Even when the benchmark universe reflects the appropriate average account balance, the report illustrates the wide range that exists between the low and high-cost providers.
"As a fiduciary, a plan sponsor needs to make sure their fees are reasonable," said Joseph W. Valletta, co-author of the 401k Averages Book. "That reasonability test begins by understanding the range, what's high and low, and what does the average or median look like. The range between the high and low total plan costs on a $5,000,000 plan, with $10,000 average account balances is 0.73 percent to 2.15 percent."
A detailed copy of the full report is available at www.401ksource.com/special-report.
About 401k Averages Book
Published since 1995, the 401k Averages Book is the only resource book available for nonbiased, comparative 401k average cost information. It's designed to provide retirement plan advisors, employers and financial professionals with essential 401k cost information needed to determine if their 401k plan costs are above or below average. The 17th 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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