NEPC: Plan Fees Flat, But Buyer Beware. For the past seven years, defined contribution (DC) plan recordkeeping, trust and custody fees have been declining steadily year over year. That is, until this year, when fees remained flat.
That’s according to the results of NEPC’s 12th Annual Defined Contribution Plan and Fee Survey, which studied trends in the management of America’s retirement plans. The survey also found that median record keeper, trust and custody fees for DC plans came in at $59 per participant, up slightly from $57 in 2016.
NEPC’s 2017 survey reported that the asset-weighted average expense ratio for DC plans is currently 0.41%, consistent with the 2016 figure (0.42%). However, both the median fee and average expense ratio have shown significant declines since NEPC’s inaugural survey in 2006. Back then, fees were $118 and the expense ratio was 0.57%.
Not to worry, though. NEPC says it believes plan fees will decline again next year, largely due to the number of plan sponsors weighing share class and vendor changes, but who have not yet completed them.
The Department of Labor’s fiduciary rule has shone a spotlight on fees, with extra scrutiny being placed on plan sponsors and decision-makers. As DC plan fiduciaries, sponsors should understand what they’re paying for, and measure whether those fees are fair. In a world where conversations around plan fees are supposed to be more transparent than ever, sponsors have ample opportunity to evaluate their service providers and make sure they’re getting the most value for their plan dollars.
Sponsors who make prudent decisions and show they’ve acted in their participants’ best interests — two hallmarks of a good fiduciary under the DOL’s definition — are more likely to come out ahead if their plan’s fees are ever called into question. In today’s aggressive legal and regulatory environment, it pays for sponsors to be careful, especially when it comes to plan fees.
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