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401(k) Providers Shrinking in Number, But Adding Services

As industry consolidation continues apace, the universe of 401(k) plan providers for employers is shrinking. But that doesn’t necessarily mean that competition among the providers is correspondingly reduced. Workforce Online reports that the remaining providers are offering more services as a result of heightened competition.

Providers face plenty of pressures courtesy of the Great Recession and federal fee disclosure regulations. Callan Associates reported that in 2007, there were 38 companies offering record keeping services; seven years later, there are nine fewer. Not only that, Callan’s 2014 DC Record Keeper Database says that the top six record keepers hold 75% of 401(k) assets and 67% percent of 401(k) participants.

Record keeping fees for defined contribution plans have been falling steadily: consulting firm NEPC reports that the cost for this service was $118 per participant in 2006, $92 in 2012 and $80 last year. Nonetheless, the Workforce Online report says, providers still regard record keeping services as a staple and as a way to get their foot in the door to build future business.

Despite their continued emphasis on record keeping, with the drop in fees and the contraction of their industry, providers are offering additional services, including administration, asset management and education. Experts also consider it essential that providers offer other kinds of retirement vehicles, such as annuities and IRAs.