Plan sponsors overwhelmingly feel the costs they and participants pay on their defined contribution plans are competitive, according to the 2015 Deloitte Defined Contribution Benchmarking Survey.
That confidence is derived from more than instinct.
Of the more than 400 sponsors surveyed, 75 percent said they have performed a detailed fee analysis on their plans.
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Half of sponsors report that all record keeping and plan administrative fees are paid for by revenue made on plan investments.
About 41 percent of plans have a direct fee assessed by the record keeper, and the remaining 9 percent said record keeping and administrative fees are wrapped into the expense ratio fees on selected investments.
The average direct record-keeping fee was $42 per participants, while the average wrap fee for services was 0.12 percent of a participant's assets.
Fewer sponsors are picking up administrative costs in 2015.
Only 36 percent of sponsors said they paid the tab, down from 40 percent last year and 50 percent in 2012.
When sponsors do choose to pass record keeping costs on to participants, they assess those costs in a flat per-participant-fee most 31 percent of the time.
Less popular are so-called pro rata formulations, where participants pay a share of record keeping costs based on the size of their accounts; 15 percent of sponsors reported passing costs that way.
And 18 percent of the time sponsors will split record keeping costs with participants.
More than ever, defined contribution plans are incurring what the report calls "separate fees"—costs for services that help plans stay compliant and educate participants.
About 40 percent reported they pay a separate fee to help with filing Form 5500s, a more than three-fold increase from the last year.
An equal jump was spent on non-discrimination testing, and 28 percent of sponsors say they pay a separate fee for plan communications.
And as more sponsors offer financial wellness services to participants, more are doing so free of charge to participants.
Nearly 60 percent report that there is no charge for participants' access to education and wellness plans, up from 50 percent that said so in 2012.
When participants do pay for wellness programs, they pay a per-participant fee 14 percent of the time, and a fee based on their assets 17 percent of the time.
The growth in managed accounts is one way sponsors are countering participants' confusion over which investments to choose, which the report finds is a primary challenge in the continuing effort to improve plan design functionality and retirement outcomes.
That extra guidance rarely comes free to participants.
Only 3 percent of sponsors said they pick up the extra cost of managed accounts, while 78 percent of sponsors say participants are assessed an asset-based fee. About one in five sponsors reported that there is additional cost for managed account services.
In 2015, the average 401(k) account balance grew to $99,011, up four percent from last year, according to Deloitte's survey.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
