Retirement Plan Costs Hit New Low As Sponsors Renegotiate Fees: Survey

The vast majority of plan sponsors have renegotiated record-keeping fees since 2013, according to a survey conducted by consulting firm NEPC.

Retirement plan costs are lower than at any point in the survey’s history.

Details from PlanSponsor:

Since 2013, 81 percent of the 117 plan sponsor respondents report having renegotiated their recordkeeping fees; 51 percent of the plans in the survey, which had an average size of $1.1 billion in assets, now apply a per-participant fee for recordkeeping.

Total investment management fees averaged 42 basis points, down from 57 basis points in 2006 and 46 basis points in 2014.

Average recordkeeping costs were $57 per participant last year, down from $92 in 2011.

An NEPC partner mused whether, at some point, the lower fees would affect service levels. From PlanSponsor:

Ross Bremen, a partner at Boston-based NEPC, expected fees to show some leveling in this year’s report.

“While lower fees reflect the good work sponsors have done to reduce fees on participant’s behalf, at some point service levels could suffer,” said Bremen in a statement accompanying the report. “A race to the bottom, at the risk of sacrificing service and innovation, is not in the participants’ best interests.”

[…]

The trend to a strict per-participant fee structure for recordkeeping services is removing flexibility from plan design as a growing consensus of retirement experts, policymakers and participant advocates say savers need more personalized savings and decumulation strategies.

“The idea that recordkeeping is a commodity is just not the case,” said Bremen, who noted that 21 percent of surveyed plans do not use any revenue-sharing agreements to help shoulder the cost of plan services.