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Reducing Your 401(k) Fund Expenses

According to The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2013 study conducted by the Investment Company Institute (ICI), the expense ratios that 401(k) plan participants incur for investing in mutual funds has declined from 0.77% in 2000 to 0.58% in 2013. Even though averages have lowered, we still see prospective clients that have weighted average investment costs on the high end of the scale.

Doing something as simple as changing to a different share class of the same fund could provide your participants with lower fees for the same investment. Last year, we reviewed a prospective client’s investment line-up that had assets of more than $400 million. The Mid-Cap index fund that was being used had an expense ratio of 0.50%. They were shocked to find out that they could replace this fund with another Mid-Cap index fund for 0.08%.

As a plan sponsor, you can analyze if you have reasonable fund expenses by:

  • Comparing your plan to the to the ICI study mentioned above.

  • Asking your vendor if lower cost share classes of your same funds are available. (ProCourse clients have a Share Class Review that is conducted each year on your behalf.)

  • Asking for help from the experts: ProCourse offers an individualized Investment Fee Benchmarking review that may help you considerably lower costs for your participants.

  • Being consistent: Make sure you are reviewing fund costs and looking for updated share class opportunities annually.

#401k #Fees #expenses #mutualfunds

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