Plan Sponsors Ask…Q1 2025

Q: We’ve noticed that the average fund expense ratios for several options in our plan’s investment line-up continue to decrease on a fairly consistent basis. Is this part of an industry trend?

A: As a matter of fact, 401(k) plan participants have incurred substantially lower fees for holding mutual funds over the past two decades, according to recent research from the Investment Company Institute. The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2023, shows that from 2000 to 2023, the average equity mutual fund expense ratio paid by 401(k) investors dropped by more than half (60%), offering them potentially higher returns and balances in retirement. The average bond mutual fund expense ratio has dropped by 63%. In addition, from 2008 to 2023, average target date fund expense ratios have also dropped by more than half.

Q: Several of our older employees would like to get more education and guidance on Social Security benefits. Our recordkeeper has provided a few basic flyers, but we don’t have much else. Do you know of any industry resources we could pass along to them?strong>

A. AARP has sponsored a 10-part video series on YouTube that answers the most common questions about Social Security. Each part is 2 - 3 minutes in length, covering such topics as “What’s The Best Age to Apply For Benefits?”, “How Do I Apply?” and “How Do Social Security and Medicare Work Together?” The video series can be accessed at: https://www.youtube.com/playlist?list=PLCs-cyDdbqlIH6aPfUvR6pyeF5YriXnP-.

Q: Our advisor has been encouraging us to add a retirement income solution to our plan in 2025. We feel it’s important, but is there any recent data to help us with prioritizing this effort?

A: According to Black Rock’s 2024 Read on Retirement report, 60% of employees (across all generations) worry they will outlive their retirement savings. Of those, 80% say it is negatively impacting their mental health. Ninety-three percent say knowing they would have guaranteed retirement income would improve their mental health right now. The Black Rock survey also revealed that “adding investment options that provide the option for secure income” is the top single change plan sponsors said could improve future employee retirement outcomes. In addition, a retirement income planning tool is the top workplace benefit sponsors believe will attract and retain talent in the current environment.

For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation. ©2025 Kmotion, Inc.