How to benchmark your 401(k) fees: a guide for owners
Most owners can’t say what their 401(k) costs, and that is common, not careless. Fees are split across several parties and often paid out of participants’ accounts, where no one sends the business a bill. Benchmarking puts a number on the plan’s total cost and compares it with similar plans. Here is how to do it. Want a second set of eyes? Request a plan review.
Why it matters
Small differences compound. The U.S. Department of Labor gives a simple illustration: over 35 years, an employee whose account pays 1.5% a year in total fees could end up with about 28% less than one paying 0.5%, assuming the same returns. As plan sponsor, you are also responsible under ERISA for making sure the fees your plan pays are reasonable for the services it receives.
Step 1: Gather the documents
- The 408(b)(2) fee disclosure. Your service providers must give it to you as plan sponsor. It lists who gets paid, how much and for what.
- The participant fee disclosure (404a-5). What employees see about fees and investment expenses.
- Your service agreements. Look for termination fees, surrender charges and revenue-sharing arrangements.
- A recent plan statement. Total assets and number of participants with balances.
Step 2: Sort every fee into four buckets
| Bucket | What it pays for | Where to find it |
|---|---|---|
| Recordkeeping and administration | Accounts, website, testing, government filings | 408(b)(2) disclosure, invoices |
| Advisory | Investment selection and monitoring, employee education | 408(b)(2) disclosure, advisory agreement |
| Investment expenses | Each fund’s expense ratio, including any revenue sharing | 404a-5 disclosure, fund fact sheets |
| Participant-level fees | Loans, distributions, court orders | 404a-5 disclosure |
Step 3: Convert everything to one number
Add the annual dollar cost of each bucket and divide by plan assets. That all-in percentage, together with the dollar total, is what you compare. Be careful with revenue sharing: part of a fund’s expense ratio may already be paying the recordkeeper, so don’t count it twice.
Step 4: Compare with similar plans
Cost depends heavily on plan size and services. A plan with 15 participants and $1 million in assets will not cost the same percentage as one with $20 million. Compare with plans of similar assets and headcount, and compare services as well as price: a lower fee that drops testing, filings or investment oversight may not be a better deal.
Step 5: Decide what to do
- Fees look reasonable: write down what you reviewed and why you concluded it. That record is part of a prudent process.
- Fees look high: ask your current providers to reprice first. Many will.
- Still out of line, or service is poor: request proposals from other providers (see how to switch 401(k) providers).
Make it a habit
A light review every year and a full benchmark every few years keeps the plan current and documents that you are meeting your fiduciary duties as a plan sponsor.
Common questions
How do I find out what my 401(k) plan costs?
Start with the 408(b)(2) fee disclosure your providers must give you as plan sponsor, then add fund expense ratios from the participant fee disclosure. Add the annual dollar cost of each fee and divide by plan assets to get an all-in percentage.
How often should a small business benchmark its 401(k) fees?
A light review every year and a full benchmark every few years is a common practice. Keep a written record of what you reviewed and what you decided.
Is a cheaper 401(k) always better?
No. ERISA requires fees to be reasonable for the services received, not the lowest available. Compare services such as testing, filings and investment oversight alongside price.
Want your plan’s fees benchmarked?
Send us your latest fee disclosure, and we’ll put a number on your plan’s total cost and compare it with similar plans. The initial plan review is complimentary, and we aim to reply within one business day.
Request a plan reviewGeneral educational information as of September 27, 2026; limits and rules change. Not individualized investment, tax or legal advice. Consult your tax adviser about your situation.