How to Find & Calculate John Hancock 401(k) Fees

If you have questions about John Hancock 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 John Hancock 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 John Hancock’s pricing works, how much you’re paying, and how your fees stack up.

Let’s dive in.

What are Average John Hancock 401(k) Fees?

In our most recent Small Business 401(k) Fee Study, we found that John Hancock plans cost small businesses an average of 1.58% of plan assets each year, with their admin fees totaling about $430.34 per participant.

While their per-capita admin fee is already above the study average of $422.30, that number can easily grow much higher due to the way these fees are charged.

In our experience, about 80% of admin fees charged by John Hancock 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 that they’re paying them, but they’re always charged as a percentage of plan assets. That means plan participants will automatically pay John Hancock 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 John Hancock 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 John Hancock 401(k) Fees

To understand how much you’re paying for your John Hancock 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 John Hancock 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 John Hancock 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 John Hancock 401(k) fees, you’ll need 3 documents:

• Updates to 408(b)(2) Disclosure Information: John Hancock is obligated by Department of Labor regulations to provide employers with a 408(b)(2) fee disclosure. This document contains John Hancock’s pricing model, as well as plan-level information on the direct and asset-based fees they’re charging. This information is intended to help employers evaluate the “reasonableness” of their 401(k) fees. This document can be found on the John Hancock 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: John Hancock 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 them. As such, you’ll need to factor the TPA’s pricing into your John Hancock 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 John Hancock’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 their annual returns.

Direct fees are the most transparent and are probably the ones you’re most familiar with.

With John Hancock, these are displayed as an asset-based percentage on the first page of their “Updates to 408(b)(2) Disclosure Information” document:

In step 4, you’ll multiply this percentage by the total assets of your plan to calculate the direct fees charged by John Hancock.

Next, you’ll need to find the direct fees charged by your TPA. Below is an example of a TPA invoice:

In step 4, you’ll add the TPA’s annual fee to the fees charged by John Hancock.

Most often, direct fees are only a small portion of the 401(k) administration fees charged by John Hancock. The company makes most of their money via “indirect” fees. We’ll show you how to uncover those next.

Step 3 – Uncover John Hancock’s Hidden 401(k) Fees

In our experience, the vast majority of John Hancock’s administration fees (about 80%) are paid from the fund expenses of plan investments. These “indirect” fees come in two basic types:

1. 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.
2. 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 John Hancock fee disclosure, which makes them really easy to overlook. Instead, these hidden fees are disclosed as a percentage of assets in the “Investment Information and John Hancock's Indirect Compensation” section of the “Updates to 408(b)(2) Disclosure Information” document:

In step 4, you’ll multiply these percentages by the applicable fund balance to calculate the indirect fees charged by John Hancock.

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 John Hancock 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.

Start by entering John Hancock’s direct fee as a % of plan assets into the “Direct Fees” line item towards the bottom of your spreadsheet. The formula will then automatically calculate your direct fees.

Once you have that, simply add your TPA's fees to the “TPA” Fees line item.

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 John Hancock plan. $28,606.11 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 0.92% ($28,606.11/$3,093,905.56).

Also Evaluate Your Administration Fees on a Per-Capita Basis

After you have calculated your all-in fee, we recommend you take a quick look at your John Hancock administration fees on a per-capita (i.e., headcount) basis.

The reason?

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 a $1,625,825.48 401(k) plan with only 7 participants 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. In our example, this number is $480.80 – which is quite a bit higher than participants could be paying with a low-cost 401(k) provider.

Don’t Let Your John Hancock 401(k) Fees Get Out of Hand

By now, you should have a complete breakdown of your John Hancock 401(k) fees and how they’re being charged.

Even if yours are below average now, John Hancock’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.