Price Forecast: 401(k) Administration Services

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  • Tags : Finance | 401(k) Administration Services | Price trend | Price forecast | Procurement research | Category market forecast

Recent Price Trend - 401(k) Administration Services

The price for 401(k) administration services has declined at an estimated annualized rate of 1.5% in the three years to 2017, aiding buyer power. While input costs and demand drivers affect service prices, the price trend can be better attributed to the introduction of regulation forcing companies to disclose fees more clearly, which has then driven down the price. Also, the rise in the number of lawsuits that employees have brought against employers because of levying unfair fees for 401(k) plans and mismanagement of employees’ retirement funds has translated into a price decline, as employers have renegotiated contracts with providers for cheaper services. Additionally, buyers have increasingly opted to purchase cheaper services that track indexes rather than more expensive services that involve active management of funds.

Because of these developments, increasing demand for services has served to temper price declines rather than cultivate price growth. Demand for services has increased in concert with economic growth during the past three years. In particular, the number of employees has boosted demand for 401(k) administration services because employers have required a higher breadth of services to manage a larger number of employers. Continued growth in the number of adults aged 65 and older also has sparked demand for 401(k) administration services by suggesting a future need for 401(k) plans, which has given current employees an incentive to request such plans from employers. Finally, improvements in the S&P 500 have bolstered demand for 401(k) administration services by boosting the appeal of investment platforms such as 401(k) plans. By cultivating demand for 401(k) services, these drivers have limited the extent to which prices have fallen.

The price for 401(k) administration services has exhibited a low level of volatility in the three years to 2017, indicating that rates for services have not fluctuated considerably on an annual basis. As a result, buyers have been able to more accurately budget for 401(k) administration services, further helping buyer power. Additionally, in light of future price reduction, buyers may benefit from holding off on purchasing services if possible.


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