Small Business 401(k) Fees & Trends
A guide to the average 401(k) fees and trends for small businesses.
Small Business 401(k) Plan Average Fees
For most small businesses with less than $1 million in assets the breakdown of the average 401(k) plan cost could be:
- $5,000 to $10,000 a year
- Initial start-up fee $500 - $3,000
- Quarterly per participant charges $15 - $40
- Administrative fees - $800 - $1,000 a year
Small plans have a large range of cost differences. With plans with approximately $1 million in assets, the study noticed a cost ranging from 0.72% up to 2.69%!
That is a major range and expense for small businesses.
401(k) Plan Fee Trends
According to the National Association of Plan Advisors 2021 study. Since 2017, 401(k) plan fees have actually decreased overall for most plans.
This is especially surprising given the current inflationary conditions everyone is seeing.
For plans averaging $50 million in assets with approximately 1,0000 participants, the fees decreased from 0.90% in 2017 to 0.88% in 2021.
Smaller plans have received a discount as well. However, the information available on these plans are a little more limited.
While many small business retirement plans do not have 100 participants or $5 million in assets, this is where the study started. For plans with this average, fees decreased from 1.25% in 2017 to 1.19% in 2021.
Average 401(k) Performance
While the 401(k) performance is heavily impacted by market conditions such as a bear vs. bull market, on average, the 401(k) plan returns between 5% to 8%.
Depending what your organization's:
- Goals
- Risk tolerance
- Portfolio allocation
This will all greatly impact your returns. Have you looked at how your 401(k) investments have been performing over the last year, three years, or five years?
You may be surprised to see your performance is not performing as well as you thought. In addition, when you take into consideration the fees, you may be losing more money than you thought.
401(k) Employer Match
Employer's matches can range depending on the type of 401(k) as well as the plan document. For the average 401(k) plan, the typical employer match is 4.7% as of 2019.
The matching process could be based on an employer contributing $0.50 for each $1.00 contributed by the employee. In other situations, it may be a dollar-to-dollar match. It all depends on how the 401(k) plan document is set up.
401(k) Administration Fees
The 401(k) administration fees charged by a 401(k) plan advisor can vary from as little as 0.05% to 2%.
As with the other 401(k) fees, the larger the assets and more participants, typically the smaller the administration fee.
Our 401(k) Plan Review
Langan Financial Group specializes in 401(k) plans for both small businesses and mid-size businesses. We can help you navigate the complexities of retirement plan regulations and review your plan. to ensure it is:
- Cost competitive
- Maximize fiduciary coverage
- Minimize administrative burdens
- Maximize employee engagement
Unlock Hidden Savings in Your 401(K) – Schedule a Free Review Now!
Give us a call at 717-288-1880 or visit our 401(k) advisor contact page to see how we can help your retirement plan, today.
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