The just-released 25th Edition of the 401k Averages Book confirms what many of us on the fiduciary side have known\u2014and preached\u2014for years: fees continue to fall, but not evenly. While this is welcome news, it\u2019s also a wake-up call for those who still haven\u2019t benchmarked their plans in the last few years.<\/p>\n
Investment-related fees dropped between 0.02% and 0.12%, depending on plan size. Recordkeeping fees inched downward, in some cases by 0.03%, driven by fierce pricing competition and heightened fee transparency demands from sponsors, participants, and yes\u2014plaintiff\u2019s lawyers.<\/p>\n
Advisor fees? Largely flat or slightly down, averaging a 0.01% decrease. That\u2019s consistent with what I\u2019ve seen in my own practice: fee compression is real, and fiduciaries who don\u2019t regularly test their plan pricing against the market are either asleep at the wheel or setting themselves up for trouble.<\/p>\n
And here\u2019s the punchline: smaller plans still get the short end of the stick. A $5 million plan is paying 1.08% in total costs, while a $50 million plan pays 0.76%. Advisor comp alone drops from 0.37% to 0.16% as plan size scales. If you\u2019re a small employer reading this, don\u2019t assume your costs are \u201creasonable\u201d just because no one\u2019s complained\u2014benchmark, document, repeat.<\/p>\n
The 25th Edition includes 24 plan scenarios, helping plan sponsors see how their plan stacks up. One stat jumped off the page: a $1 million plan with 100 participants can cost anywhere from 0.87% to a staggering 3.56%, depending on the provider and fee structure. That\u2019s a lawsuit waiting to happen.<\/p>\n
As always, kudos to Joseph Valletta, CFA, and the team at Pension Data Source for providing this indispensable benchmarking resource. For fiduciaries, ignorance is not bliss\u2014it\u2019s liability.<\/p>\n
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