Dive Brief:
- There is more good news in the employee benefits world, as recordkeeping and investment management fees continue to decline for 401(k) and other defined contribution plans, according to a new survey, SHRM reports.
- NEPC LLC, an investment consulting firm, recently published the results of its 11th Annual NEPC Defined Contribution Plan and Fee Survey, and it found that the average asset-weighted expense ratio for providing record-keeping services to defined contribution plans is currently 0.42%, compared to the 2006 level of 0.57%.
- Also, according to SHRM, the survey, which had 117 respondents from defined contribution plans with $127 billion in aggregate assets and 1.4 million plan participants, reported that contracts for record-keeping fees have been modified by 82% of plans since 2013, leading to 51% of plans adopting a fixed-fee record-keeping arrangement, which is another way to keep costs down.
Dive Insight:
According to experts from NEPC, plans of all sizes are looking for ways to reduce reliance on higher-cost revenue-sharing, which means lower costs for plan sponsors and participants. The same experts noted an emerging new option for employee investors, the lifetime income offering, is "one to watch" among the survey results.
In fact, a different survey, from Willis Towers Watson, found that while many plan sponsors are taking a cautious approach to adopting lifetime income solutions, their growth should continue. That survey found 53% of plan sponsors that haven’t adopted a solution say they may do so in the future.
Employers are genuinely concerned that employees don't have enough income to retire and want to help them build adequate retirement savings. But most existing solutions aren’t as effective at minimizing longevity risk as life income insurance-backed products, annuities and other retirement income-generating options, according to Willis Towers Watson.