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DC fees affected by account size, participants, equity investments: Survey


Higher defined contribution plan fees are associated with participants’ lower average plan balances, plans with fewer participants and plans with higher equity allocations, according to a new survey by the Investment Company Institute and Deloitte Consulting.

“The survey responses suggest economies are gained as a plan grows in size because these fixed costs can be spread over more participants and/or a larger asset base,” said a report accompanying the survey. “The survey also showed that equity investment options have higher expense ratios than fixed income or other asset classes.”

Factors that help reduce fees also include fewer investment options, higher participant contribution rates and the use of automatic enrollment, Daniel Rosshirt, a principal with Deloitte, said in a webinar on the survey.

Several other factors “did not appear to have a significant” impact on fees, including how long a plan had been with a service provider or how much of the plan’s assets were invested in the service provider’s proprietary investment options, Mr. Rosshirt said.

The survey was based on interviews of executives at 525 defined contribution plans, almost all of which are 401(k) plans. The survey was conducted from January through August.

Robert Steyer is a reporter for Pensions & Investments, a sister publication of Business Insurance.