Decreasing 401(k) Fees

According to a new study by BrightScope Inc. and the Investment Company Institute, the fees associated with 401(k) plans are falling.  In looking at plans that existed from 2009 to 2012, the total costs decreased on average by around 10 basis points, with the largest decline coming in plans with less than $1 million in plan assets.  Researchers pointed to several key factors as to why costs are coming down.

“The decrease can be attributed to the rising awareness by both plan sponsors and plan participants of fees and their effect on 401(k) savings.”  The scale of plans is also a factor, since bigger plans can spread the costs among a larger base. 

A final factor is increased use of index funds, which tend to have even lower fees.  “By 2012, nearly a quarter of the assets in 401(k) plans were invested in index funds.  That’s up from 17 percent in 2006 and 23 percent in 2012.” 

See Ryan W. Neal, 401(k) Fees Are Coming Down, Wealth Management, Dec. 9, 2014.