In this, the year before a new series of fee disclosure regulations take hold, plan sponsors’ sense of fees paid by their plans was all over the board. About a quarter of mega plans (those with more than $1 billion in plan assets) said that the “approximate average expense ratio” of all the investment options in their plan was less than 25 basis points (0.25%), a sentiment expressed by nearly one in eight overall. Nearly half of those mega plans said the overall fee was between 25 and 50 basis points, but 8.2% in this market segment said they “didn’t know.” Indeed, the “don’t know” group was a significant group across market segments; one in 10 in the mid-size (plans with between $50 million and $200 million in plan assets) and large (between $200 million and $1 billion) categories admitted that, as did more than 18% in the small-plan (between $5 million and $50 million in plan assets) category, and a full third of those in the micro-plan segment (plans with less than $5 million in plan assets).
That said, more than two-thirds (70.4%) of plan sponsor respondents said they review plan fees annually, and the larger the plan, the more likely they were to do so. However, 6%—mostly among those in the micro-plan segment—admitted they “never” formally review actual administrative costs/fees. In a new question in this year’s survey, we asked who was paying those administrative/recordkeeping costs—and, perhaps somewhat surprisingly, a clear plurality (34.6%) said the employer did, and did so exclusively, a finding that included nearly half of micro plans, 29% of small plans, and 15% of plans in the larger segments. On the other hand, larger plans were significantly more likely to say that participants were carrying the costs through revenue-sharing arrangements. In fact, more than a third of mid-size and large plans did so, as did more than a quarter of those in the mega market.
Regulatory changes coming in 2012 will change the landscape for 401(k)s.
Please comment or call to learn how this will affect you.
- Hybrid Pension Plans on the Rebound (401kplanadvisors.com)
- Plan sponsors to rely more on advisors (401kplanadvisors.com)
- Regulations and Costs Shaping Future of 401k Plans According to FRC Study (401kplanadvisors.com)