At a glance
- For a plan sponsor or recordkeeper choosing an automatic rollover provider, that fee schedule is a term a committee can compare across bidders.
- Because the charges are flat dollars rather than a share of the balance, the same $100 is 3% of a $3,300 account and 10% of a $1,000 account.
- Year one carries the most weight: $100 up front plus $60 of maintenance comes to $160, or about 4.8% of a $3,300 balance, before the account earns anything.
68% of automatic rollover IRAs lost value over one year, according to a whitepaper by EBRI and PensionBee.
The whitepaper estimates up to 13 million such accounts holding as much as $43 billion. It puts opening fees as high as $100 and monthly maintenance at $5.
For a plan sponsor or recordkeeper choosing an automatic rollover provider, that fee schedule is a term a committee can compare across bidders. Splitting $43 billion across 13 million accounts gives about $3,300 each. On that balance a $100 opening fee is roughly 3%, and $5 a month — $60 a year — is about 1.8%, both before any investment return.
Because the charges are flat dollars rather than a share of the balance, the same $100 is 3% of a $3,300 account and 10% of a $1,000 account. That arithmetic suggests the cost ranking of two providers can depend on which balance size a committee uses to compare them.
Year one carries the most weight: $100 up front plus $60 of maintenance comes to $160, or about 4.8% of a $3,300 balance, before the account earns anything.
Reported by The Wrap desk from EBRI and PensionBee whitepaper. Published . Corrections