For Plan Sponsors

Is Your Company's 401(k) Costing You Too Much? A Kitsap Employer's Guide to Plan Fees

Your 401(k) is probably your second or third biggest benefit expense. And there's a decent chance nobody has checked in years whether you're overpaying - because plan fees are spread across several places and can be easy to miss.

Written by Tyler Walters

In this article

Why does my 401(k) cost more when the market rises?
Where the cost hides
How do I know if my 401(k) fees are too high?

Why does my 401(k) cost more when the market rises?

Here's something it's easy to overlook, and it's a little counterintuitive.

As balances grow, a percentage-of-assets fee grows in dollars.

If your plan is priced as a percentage of assets - and most are - then as the market rises and account balances grow, you're paying more in actual dollars every year for the exact same service. A good year for your employees quietly becomes a more expensive year for the plan. Nobody sends you a notice about it. The bill just gets bigger as the balances do.

Where the cost hides

Plan cost isn't one clean number on one line. That's the whole problem.

It's spread across investment fees, administrative fees, recordkeeping, and advisor compensation. Some of it is disclosed plainly. A lot of it is buried inside the fund expenses your participants pay without ever seeing a bill. The only way to actually know what you're paying is to add all of it up - as a dollar figure and as a percentage of plan assets - and many have never seen that total.

How do I know if my 401(k) fees are too high?

Benchmarking just means comparing your all-in cost against plans of a similar size and participant count. It answers a simple question plainly: are you competitive, or are you getting overcharged?

It gives you leverage to renegotiate if the answer's the wrong one. And - not a small thing - it documents that you looked, which is part of your job as the plan's fiduciary. So it protects you two ways at once: your wallet and your liability.