The U.S. needs a simplification of the administration around 401(k) retirement plans, said F. William McNabb III, CEO and chairman of The Vanguard Group Inc.
“A weakness in the U.S. is that small companies find 401(k) plans extremely burdensome (from an administration) perspective,” said Mr. McNabb, speaking at a briefing in London on March 17. “One of the things we would like to see is some sort of simplified scheme so it is easier for companies with less than 50 to 100 employees to have coverage (with a 401(k) plan), but with less administrative burden.”
He said options have come to the market, but that nothing “has really taken hold.”
Mr. McNabb also addressed the question of management fees for retirement plans.
“The large end of the 401(k) market ... is the most competitive part of asset management right now. The fee pressure is unbelievable in the U.S.”
“We have entered the small plan market very aggressively in the U.S.” when it comes to fees, he said. “We think what will follow the downward pressure in the large end of the market will force its way down to the small end.”
He added that “competitive forces” have driven down the average 401(k) fee in the U.S. — and that, when it comes to competitors looking to “roll up their sleeves” and compete with Vanguard, “I relish a good fight.”
