What’s in a Workplace Retirement Plan? (2025)

When investors are considering their workplace retirement plans in relation to their other accounts, it’s essential that they ask two fundamental questions: How much does it cost, and how good are the options?

In our most recent Retirement Plan Landscape report, we examine 10-year trends in the private-sector workplace plan market, covering both defined-benefit and defined-contribution plans. Our analysis covers the size of the markets, the investments retirement savers are using, and the benefits that defined-benefit plans are paying.

Here are a few insights from our research.

Average Cost of Workplace Retirement Plans Is Declining, but Variation Persists Among Small Employers

Saving for retirement through a workplace plan continues to get cheaper year after year, but costs still vary widely. An investor’s exposure to these costs depends primarily on the size of their employer.

The total cost of a workplace retirement plan is composed of the asset-weighted expenses associated with the plan and overall plan administration expenses. And, in both regards, scale is an enormous advantage.

Although median costs have declined across plans of all sizes, the drop has been greatest among larger plans (despite these plans already starting from a lower point). Across plans of all sizes, the median declined by 7% to 68 basis points from 2021 to 2022, the most recent year for which we have complete data.

There will always be variations in cost among plans, even those of a similar size, but those discrepancies are the largest among the cohort of the smallest plans, as shown in the chart below. Small plans are already more likely to cost more than larger plans because of economies of scale, and this group is most likely to capture new plans that are just getting off the ground.

People who work for smaller employers and participate in small plans pay, on average, almost triple the cost to invest as participants at the largest plans—around 78 basis points in total compared with 26 basis points, respectively.

Despite the challenges faced by small plans, there is evidence that they do not always have to be expensive. At least 20% of small plans consistently cost less than the median cost for medium plans, 53 basis points.

Morningstar Medalist-Rated Investments Are Prominent on Workplace Plan Lineups

Investors in plans of all sizes are generally getting access to Morningstar Medalist-rated investment options.

The investments holding Bronze, Silver, and Gold ratings are the ones that the Morningstar research team believes will outperform their benchmark, on a risk-adjusted basis and net of fees, over the long term.

Across plans of all sizes, at least 86% of investment options that are eligible hold a Medalist Rating, on average. (Still, these offerings are slightly more common at larger plans.) For context, among US open-end mutual funds, just 29% of all share classes are in the Medalist-rated categories, although 78% of all US open-end assets are invested in these products.

On an asset-weighted basis, defined-contribution participants are clearly favoring Medalist-rated investments. Across plans of all sizes, 94% of defined-contribution assets allocated to investments eligible for rating are in those receiving a Medalist Rating. In every category of plan size, less than 1% of assets are invested in eligible products receiving a Negative rating.

The dominant presence of investments with a positive outlook for future returns is a strong sign for participants.

Despite Low Costs and High-Quality Investments, Money Continues to Exit the System

Given the scale of workplace retirement plans, that 90% of participants are in plans with at least $4 million in assets, and the fiduciary standard with which they are managed, it’s likely that investors could get a better deal in their plan than they would on their own.

The case for this is supported by the relatively low total costs we see in most plans, particularly in the larger plans with the most participants, and in the prevalence of Medalist-rated investments. For example, in 2022, just 9.5% of participants were covered by plans with total costs over 100 basis points.

Despite these circumstances, more than $600 billion has left defined-contribution plans annually since 2020. One obvious source of this outflow is workers changing jobs and rolling the money at their old employer’s plan into an IRA, rather than moving it into their new employer’s retirement plan.

While this could be the best option in some cases, investors should do their due diligence to determine if a workplace plan is better positioned to provide the best path to saving for retirement through low-cost, high-quality investments.