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Inside the Structure of Defined Contribution/401(k) Plan Fees, 2013

A study assessing the mechanics of the ‘all-in’ fee


With the estimate of employer-sponsored defined contribution plans growing to nearly $6 trillion at the end of 2013, scrutiny of these plans has grown as well. For many American workers, these plans have become an important part of their retirement savings. Specifically, the plan fees charged to employers and employees is of particular interest to the Department of Labor which has created greater transparency into plan fees through regulatory disclosure requirements under §408(b)(2) and §404(a) of the Employee Retirement Income Security Act (ERISA).

Deloitte Consulting LLP and the Investment Company Institute looked closely at the drivers of plan fees, specifically calculating an “all-in” fee that captures administrative, recordkeeping and investment-related fees for comparison and analysis. This latest research updates previous studies conducted in 2009 and again in 2011. Notably, the current study finds that, for the companies surveyed, the number of participants and the average participant account balance in the plan are drivers of the all-in fee. Specifically, plans with more participants and higher average account balances typically have lower all-in fees, benefitting from economies scale by spreading fixed administrative costs over more assets and participants. In addition, the analysis found that plans with a higher percentage of plan assets invested in diversified equity holdings tend to have higher all-in fees.

In total, 361 plans participated in the 2013 survey providing detailed information regarding plan characteristics, design, demographics, products, services and the associated fees. On average, over 200 data elements were gathered from each plan, covering plan design, investment options and plan, participant and investment fee information. Results of the survey were compared with other 401(k) industry studies to assess findings and interpret results.

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