401k administration fees

[Guest Mark Porter]

Regarding 401k administration fees, I have seen where some administrators charge the "participant" charge for those actually deferring and/or that have an account balance and others that charge the participant fee for any "eligible" participant. I am wonering which is more prevelant. It would seem logical to charge based on eligible participants since they must be accounted for.

[Jon Chambers]

It's more common to charge for eligibles. Another variant is whether the provider charges for terminated participants with balances left in the plan. Frankly, I think it is most equitable if all three are charged, but at different rates, to reflect the amount of reconciliation, transaction and reporting responsibilities required to support the account. Even though you have to track eligible non-participants, it costs less to support them, since they don't get statements, don't make trades, and probably rarely call the VRS or call center.

[MWeddell]

In my experience, it is more common for the per head charge to apply only to participants, i.e. those who had nonzero account balances at some time during the plan year.

[MoJo]

Actually, both of the other answers are right. My experience has been that "actual" participants have been the basis for charges, but as vendors take over more responsibility for eligibility tracking and determination, the trend is in favor of "eligibles" as the basis for charges.

[Larry M]

It seems to me whether the charge is per participant, or per eligible, or per employee, or per account, or as a percentage of assets, or by the phases of the moon, the payor should be concerned with the total charges - not just with how they were determined.

[Cathy from Chicago]

We charge two different fees for eligibles; one fee if eligible and participating and one if eligible and not participating. For 401(k) plans that also have a P/S contribution, our charge remains the same for those participating in the 401(k) but the eligible but not participating increases to our usual fee for P/S plans.

For terminees we bill a set price for all terminees at the end of the plan year, regardless if they've been paid out during the plan year. If a terminated participant for whatever reason does not get paid out at the end of the year in which they terminate, they are again charged at the end of the following year. We increased our charge this past year for terminees and, to date, have received no feedback on the action.

[actuarysmith]

We charge a flat base fee plus,

a per head charge for eligibles with account balances, and

a seperate per head charge for eligibles without account balances.

This is then all adjusted based upon the relative humidity, moon phase, and the current standings of the Seattle Mariners.......(Just kidding - I don't really see how the moon phase should affect our fees)