Larger retirement plans often enjoy lower fees than their smaller counterparts, thanks in part to economies of scale and stronger negotiating power. But this in no way makes them immune to fee-related challenges. While big plans generally benefit from lower fees as a percentage of assets under management, this alone doesn’t guarantee an optimal fee structure. And to complicate matters, big plans can become prime targets for litigation if there is the appearance of excessive fees.
Without regular, accurate benchmarking, hidden costs and outdated fee structures can lead to higher fees that quietly erode retirement savings, leaving plan sponsors vulnerable to legal challenges. Proactive benchmarking helps ensure fees stay competitive, services deliver meaningful value, and fiduciary risk is minimized.
The Fee Landscape for Large Plans
According to the 401(k) Averages Book, plans with $50 million in assets pay an average total plan cost of less than 1%. But in recent years, jumbo plans with at least $1 billion in assets were disproportionately the target of excessive fee litigation. As lawsuits against large plans remain persistent, plan sponsors and fiduciaries must be vigilant in reviewing fee structures to avoid becoming the next business news headline.
Plaintiffs in excessive fee lawsuits often argue that sponsors neglect to leverage their plan’s size to negotiate lower fees or fail to offer lower-cost investment options when available. Regular benchmarking as part of a holistic risk mitigation strategy helps large plans proactively assess their costs, provide documentation of fiduciary due diligence, and establish a critical layer of protection against legal scrutiny. Tools like RFP Express, powered by RPAG, can streamline this process by providing instant quotes from top recordkeepers.
Plans Can Grow Rapidly
Several factors may contribute to the rapid growth of a retirement plan, each presenting unique challenges and opportunities for sponsors:- Automatic Enrollment & Contribution Escalation. Expanded auto-enrollment and auto-escalation provisions under SECURE 2.0 can boost participant contributions and help plans grow organically.
- Market Growth. A rising stock market can rapidly inflate plan assets, increasing the overall size of a retirement plan even if participant head counts remain relatively stable.
- Mergers & Acquisitions. Corporate consolidations can bring retirement plans together, requiring a reassessment of fees, investment structures, and service providers. Post-merger, sponsors may find themselves overseeing significantly larger plans with more complex administrative and fiduciary responsibilities.
- Employer Contributions & Incentives. Companies offering competitive matches and profit-sharing incentives can see accelerated plan growth as participant account balances increase.
While a greater plan size may help improve fee negotiations, companies that neglect regular fee analyses may still overpay for services or fall out of alignment with market rates.
Leveraging Big Data for Big Plans
PlanFees’ benchmarking capabilities are powered by RPAG’s robust database of more than 120,000 retirement plans, with about $1.6 trillion in assets. This extensive data repository enables advisors to conduct highly accurate fee analyses of jumbo plans, ensuring that plan costs are competitive and aligned with industry standards. Armed with these insights, advisors can secure better service agreements and pricing from providers while demonstrating a higher standard of fiduciary care.
By continuously evaluating fees and services, large plans can stay ahead of industry trends and help optimize value for participants and sponsors, even with more complex fee structures.
Benchmark bigger — and better — with PlanFees.
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