Plan fees cut into retirement savings more than most participants realize. A recent Government Accountability Office (GAO) report shows that participants and plan sponsors missed these costs in their statements. These fees shrink savings by thousands of dollars over time, affecting participant outcomes and plan management costs.
This article explains the different fees affecting plans and shows how bringing accounts together can help lower costs and improve savings. We'll also look at how Manifest's solution makes transfers simple, helping plan sponsors reduce fees and increase retirement outcomes for participants.
The Hidden Costs in Your Plan
The GAO report points out several categories of fees that significantly affect retirement outcomes.
Record-keeping fees are charged for managing participant accounts, and they vary depending on the plan setup. Investment management fees take a percentage of managed assets, reducing investment returns over time. Trading fees appear when participants adjust their investments. Administrative fees cover loan management and legal compliance, adding extra plan costs.
These small costs add up quickly and reduce retirement savings. Plan sponsors also face rising costs, which impacts an organization's ability to offer competitive benefits. As fees grow, participants struggle to grow their balances, especially with accounts spread across multiple providers.
Common Plan Fee Structures
Understanding where fees come from helps reduce their impact. Here are the main fees in retirement plans:
Record-keeping fees pay for tracking contributions and investments. They rise when plans have many small or inactive accounts since each account needs maintenance. Investment management fees go to fund managers overseeing portfolios. Even small differences in these fees significantly affect long-term returns.
Plan sponsors face administrative costs to maintain compliance and keep participants informed. Managing multiple scattered accounts increases work for benefits teams. Trading fees apply when participants buy or sell investments. While individual trades cost little, frequent changes accumulate expenses that cut into returns.
These fees compound over time, impacting both participant savings and plan costs.
The Impact of Multiple Accounts
The average participant has 2.8 retirement accounts from previous employers. Multiple accounts mean:
Each old account requires maintenance, leading to more recordkeeping and administrative fees. A participant with several accounts pays hundreds in unnecessary fees yearly. Plan sponsors spend time and resources managing these small, separate accounts. This removes focus from improving retirement benefits and counters participant and employer savings goals.
Multiple accounts prevent plans from getting better pricing. Providers offer lower fees for larger account balances. When savings stay split up, participants miss out on these reduced costs.
Account division also makes retirement planning harder for participants. Many lose track of old accounts, which leads to higher fees and smaller balances. This creates more work for benefits teams, too.
How Transfers Reduce Plan Costs
Moving retirement accounts to one provider cuts fees and simplifies plan management. Here's the real impact:
Better pricing comes with bigger balances. Providers give better rates for larger plans, cutting costs for both participants and plan sponsors. Benefits teams spend less time managing scattered accounts. This frees up resources for other initiatives that improve participant outcomes.
Larger, consolidated accounts give plan sponsors more influence with providers. This leads to better services, investment options, and plan features. Participants gain, too - those who transfer accounts with Manifest see average balance increases of $13,450 through consolidation.
Growing Savings Through Transfers
Plan fees impact both participant outcomes and plan costs. Participants who bring their accounts to their current plan see increased savings and lower fees. Transfers create immediate value - participants see their balances grow in 21 days, which would take 4.3 years to save.
Manifest makes moving accounts simple and accessible. Plan sponsors cut hidden fees, reduce administrative tasks, and improve participant outcomes.
Don’t let fees eat away at savings. Contact us today to see how we can optimize your fee structure and increase participant retirement outcomes together.
