Defined contribution (DC) plan fees—including recordkeeping, trust and custody fees—remained flat this year, NEPC found in a survey.
The median fee per participant is $59, just a slight increase from $57 in 2016. This follows the previous seven years when the fees declined. In 2006, when NEPC first conducted this survey, the fees were $118.
“After seven consistently decreasing for the past seven years, it’s surprising to see fees flatten out even though we had been anticipating it,” says Ross Breman, NEPC DC strategist. “Plan fees were the lowest in a decade last year, and now the trend has taken a breather. Low fees have been a source of mixed emotions. While sponsors are able to highlight their good work by reducing fees for participants, it’s done at the risk of hindering innovation and service. The race to the bottom is often a double-edged sword.”
The survey also found that the median plan offers 23 investment options, up slightly from the 22 in 2016. In 2006, sponsors offered a median of only 14 investment options. Ninety-five percent of sponsors have a target-date fund (TDF) in their fund lineup, and 90% use TDFs as their qualified default investment alternative (QDIA).
Seventy-seven percent of plans use some form of revenue sharing and are looking for ways to give excess revenue back to participants. Seventy percent use revenue sharing to cover fees. However, 29% use a flat dollar charge. Only 5% of plans have excess revenue retained by their recordkeeper, and 33% return it to participants. Among non-bundled plans, 60% use revenue sharing to offset fees, 24% return these dollars to participants, and 30% have no revenue sharing.
NEPC surveyed 123 DC plan sponsors with $138 billion in aggregate assets, representing 1.5 million participants.