Why Aren't 401(k) Fees Falling?

Investment fees for most 401(k) plans dropped over the past year, according to the new edition of the 401k Averages Book. But overall plan fees, for the most part, stayed where they are. In other words, those lower investment fees weren't passed along to you.

How did that happen? For large retirement plans, those with 1,000 or more participants and at least $50 million in assets, fees to invest in large U.S. equities fell from 1.05 percent to 1.03 percent. Smaller 401(k) plans tend to incur larger fees, but those dropped as well, from 1.40 percent to 1.38 percent.

But large U.S. equities are generally the easiest, cheapest asset class to invest in. The book reports that along with increases in plan balances, there has been increasing exposure to more expensive investments. As a result, total large-plan costs remained steady for the past year, at an average of 1.03 percent. For smaller 401(k) plans, the average cost was flat at 1.44 percent.