How to Find & Calculate VOYA 401(k) Fees
If you have questions about VOYA 401(k) fees – how they work, how much they cost on average, or how you can find & calculate them for your plan – you’ve come to the right place. In this guide, we’ll show you how to calculate the full cost of a VOYA 401(k) plan using their DOL-mandated fee disclosure.
By the end of this guide, our aim is for you to have a complete understanding of how VOYA’s pricing works, how much you’re paying, and how your fees stack up.
Let’s dive in.
What are Average VOYA 401(k) Fees?
During the years we've offered a free 401(k) fee comparison service, we haven’t come across many VOYA plans. In fact, our most recent Small Business 401(k) Fee Study only included one. Its all-in cost was 1.58% of plan assets each year, with each participant paying $2,522 in annual administration fees.
Average VOYA 401(k) Fees
Avg. Plan Assets
Avg. Plan Participants
Per-Capita Admin Fees
While this plan's per-capita admin fee is already much higher than the study average of $422.30, that number can easily grow much higher due to the way these fees are charged.
In our experience, nearly 100% of the admin fees charged by VOYA are paid by revenue sharing or variable annuity wraps – “hidden” 401(k) fees that lower the investment returns of plan participants. Not only are plan sponsors or participants often unaware they’re paying them, but they’re usually charged as a percentage of plan assets. That means plan participants will automatically pay VOYA higher and higher administration fees for the same level of service as their account grows. That’s not fair!
When you factor in compound interest, these growing fees can make a huge dent in your retirement savings. As such, you want to do everything in your power to avoid paying them.
If you’re using currently using VOYA for your 401(k), your first step to avoiding these hidden fees is to find out whether or not you’re paying them. We’ll show you how to do that later.
How to Find & Calculate VOYA 401(k) Fees
To understand how much you’re paying for your VOYA plan, I recommend you sum their administration and investment fees into a single “all-in” fee. Expressing this as both a percentage of plan assets, as well as hard dollars per-participant, will ultimately make it easier for you to compare the cost of your VOYA plan to competing 401(k) providers and/or industry averages.
To make this easy on you, we’ve created a spreadsheet you can use with all the columns and formulas you’ll need. All you need to do is find the information for your plan, then copy it into the spreadsheet.
Doing this for VOYA can be a bit of a pain, but not to worry – we’ll show you everything you need to do in 4 simple steps.
Step 1 – Gather All the Necessary Documents
To calculate your VOYA 401(k) fees, you’ll need 3 documents:
- Summary of Investment Expenses and Indirect Compensation: VOYA is obligated by Department of Labor regulations to provide employers with a 408(b)(2) fee disclosure. This document contains plan-level information about the administration fees charged by VOYA. This information is intended to help employers evaluate the “reasonableness” of these fees. This document can be found on the VOYA employer website.
- Statement of Assets Report: this document (titled “Investment Allocation”) provides a breakdown of how much money is invested in each fund in your 401(k) plan. These are also sent each year, and can be found on the employer website.
- TPA Services Agreement: VOYA does not deliver third-party administration (TPA) services – one of the three administration services every 401(k) plan requires. Instead, an unrelated (usually local) TPA delivers these services. As such, you’ll need to factor your TPA’s pricing into your VOYA fee calculation. The fees charged by your TPA can be disclosed in a services agreement or invoice.
Once you’ve gathered the necessary documents, you’re ready to move on to step 2.
Step 2 – Locate VOYA’s Direct 401(k) Fees
401(k) administration fees can be “direct” or “indirect” in nature. Direct fees can be deducted from participant accounts or paid from a corporate bank account, while indirect fees are paid from investment fund expenses - reducing the fund's annual returns.
Direct fees are the most transparent and are probably the ones you’re most familiar with. Unfortunately, VOYA rarely charges any of their fees this way.
The only direct fees paid by your VOYA plan are charged by your TPA. To find these, refer to your TPA Services Agreement of a recent invoice.
Once you’ve found how much your TPA is charging you each year, your next step is to uncover VOYA’s indirect 401(k) fees.
Step 3 – Uncover VOYA’s Hidden 401(k) Fees
In our experience, the vast majority of VOYA administration fees (98%) are paid from the fund expenses of plan investments. These “indirect” fees come in two basic types:
- Revenue Sharing Fees: Revenue sharing is the practice of adding non-investment related fees to the operating expenses of a mutual fund – which reduce the investment returns of plan participants. These additional fees then compensate plan service providers. There are two general forms:
- 12b-1 fees – usually compensate a broker or insurance agent.
- Sub-Transfer Agency (sub-TA) fees – usually compensate a recordkeeper.
- Wrap Fees: Insurance companies often use variable annuities instead of mutual funds as 401(k) investments. A variable annuity is basically a mutual fund wrapped in a thin layer of insurance with additional fees and redemption restrictions. The additional fees usually include a “wrap” fee that can increase the expense ratio of the underlying mutual fund dramatically. Sometimes by more than 1%!
Neither revenue sharing nor wrap fees are disclosed as hard dollar amounts on the VOYA fee disclosure, which makes them really easy to overlook. Instead, they are disclosed as a percentage of assets in the massive 18-column table one the third page of the “Summary of Investment Expenses and Indirect Compensation” document.
Wrap fees can be found in column K, labeled “Total Daily Asset Charge”, and revenue sharing fees can be found in columns L and M (“Sub-TA Expense” and “12b-1 Fee” respectively).
In step 4, you’ll use a spreadsheet to determine the dollar amount of indirect fees charged by VOYA.
Step 4 – Calculate Your All-In 401(k) Fee
In this step, we’ll enter the information we found into our spreadsheet to calculate your plan’s total cost – or “all-in” fee (administration fees + investment expenses).
First, enter the fund information from your VOYA 408(b)(2) and Statement of Assets documents into the spreadsheet. The formulas will automatically calculate your indirect fees.
Next, we need to add your direct fees.
If VOYA charges a direct fee, enter the amount into your spreadsheet. Then add your TPA’s annual fee.
At this point, all of your administration fees and investment expenses (net of indirect fees) should be broken out and totaled, giving you the all-in fee of your VOYA plan. $29,735.00 in our example.
To make it easier for you to benchmark your fees against other plans, we recommend expressing this number as a % of plan assets. In our example, this number is 1.41% ($29,735.00/$2,096,928.75).
Evaluate Your Admin Fees on a Per-Capita Basis
After you have calculated your plan's all-in fee, we recommend you take a quick look at VOYA's administration fees on a per-capita (i.e., headcount) basis.
Excess administration fees – basically, fees that outstretch your 401(k) provider’s level of service – might not be readily apparent if they’re solely evaluated on an all-in basis with investment expenses. This is especially true if your plan has lots of assets.
To demonstrate the value of this evaluation, consider the Voya plan from our 2018 small business 401(k) fee study. While its $25,611.64 all-in fee (1.58% of plan assets) was only a bit above the study’s 1.40% average, its $2,521.81 per capita administration fee ($17,652.64/7 participants) was about six times average!
To calculate your per-capita administration fees, simply divide the administration fee total from your spreadsheet by the number of participants in your plan. For our 17-participant example, this number is $1,316.34 – which is quite a bit higher than participants could be paying with a low-cost 401(k) provider.
Don’t Let Your VOYA 401(k) Fees Get Out of Hand
By now, you should have a complete breakdown of your VOYA 401(k) fees and how they’re being charged.
Even if yours are below average now, VOYA’s revenue sharing and wrap fees can cause them to very quickly become excessive as assets grow. For this reason, it’s crucial that you compare your plan’s fees on a regular basis.
Too much trouble? We’ve got a solution.
Simply switch to a 401(k) provider that charges fees based on headcount – not assets - to the extent possible. Such a fee structure will make it easier for you to keep your 401(k) fees in check as your plan grows. You just might save some money while you’re at it.
About Eric Droblyen
Eric Droblyen began his career as an ERISA compliance specialist with Charles Schwab in the mid-1990s. His keen grasp on 401k plan administration and compliance matters has made Eric a sought after speaker. He has delivered presentations at a number of events, including the American Society of Pension Professionals and Actuaries (ASPPA) Annual Conference. As President and CEO of Employee Fiduciary, Eric is responsible for all aspects of the company’s operations and service delivery.