Understanding the true costs behind 401(k) provider pricing is crucial for HR and Finance leaders at mid-sized employers. The difference between transparent, well-managed fee structures and hidden, compounding costs can have a significant effect on both a company’s compliance record and employees’ long-term financial outcomes. At Basic Capital, we help teams navigate the complexities of 401(k) fees so that every dollar invested works harder for employees and the business alike.

The impact of even small fees is substantial: According to the Department of Labor, a 1% increase in fees can reduce a worker's retirement savings by 28% over 35 years (U.S. Department of Labor, n.d.).

This makes transparent pricing and ongoing fee review essential for any employer serious about governance and employee trust.

The Split That Drives Decisions: Employer vs Employee 401(k) Costs

When evaluating 401(k) provider pricing, it’s crucial to distinguish between costs borne by the employer and those paid by participants. Here’s how the most common fees break down:

Employers may also make matching contributions, which are not considered a fee but affect total plan costs.

A study by the National Association of Retirement Plan Participants found that many participants could not correctly calculate their account fees, and many were unaware fees were being deducted.

To see how these costs can scale as your company grows, review our guide on how costs scale as your business grows.

Where Confusion Creeps In: Bundling, Add-Ons, and Hidden Fees

It’s a common concern: Why do 401(k) fees feel so complicated and hard to pin down?

The answer lies in bundled service models, à la carte add-ons, and fees that are not always disclosed up front. Nearly half of employers did not know whether their plan provider engaged in revenue-sharing arrangements (GAO, 2012).

Many employers do not fully understand all the fees tied to the plans they sponsor, and the Government Accountability Office found that this lack of understanding can lead to higher costs for both employers and employees (GAO, 2011).

Complex fee structures and limited transparency can erode trust and reduce the long-term value of retirement plans.

A significant number of 401(k) participants are unaware of the fees they are paying, which can lead to reduced retirement savings.

For more on how companies are addressing this, see our article on getting the balance right between participant and employer fees.

What Transparent Pricing Looks Like in Practice

The best 401(k) provider pricing models are simple, clear, and fully disclosed. Transparent pricing means plan sponsors and participants know exactly what they’re paying for, without hidden costs or ambiguous revenue-sharing arrangements.

• Full Disclosure: Service providers and plan administrators must clearly outline all fees, administrative, investment, recordkeeping, and advisory, per ERISA’s 408(b)(2) and 404a-5 rules.

• Easy-to-Read Statements: Plan participants should receive fee disclosures that are accessible and easy to compare. GAO notes that challenges remain in helping participants fully understand fee disclosures, even with improved transparency (GAO, 2021).

• Regular Updates: Any changes to fees or services should be communicated promptly.

A practical guide to 401(k) fee disclosures can help employers benchmark against industry standards and communicate effectively with employees.

Transparency is more than a regulatory checkbox, it’s a driver of trust, participation, and plan health.

Questions to Ask in Demos & Proposals

Selecting a new 401(k) provider or evaluating an existing one? Here’s a step-by-step approach to cover all critical fee-related bases:

1. Request a Full Fee Breakdown: Ask for itemized administrative, investment, and recordkeeping fees.

2. Clarify Revenue Sharing: Inquire about any indirect compensation or revenue-sharing arrangements.

3. Check Compliance with 408(b)(2) and 404a-5: Make sure disclosures meet DOL requirements for both plan sponsors and participants, as these regulations are designed to enhance transparency and empower better decision-making (GAO, 2024). Plan sponsors are required to act solely in the interest of participants, and fee evaluation is a key part of that fiduciary duty.

4. Ask About Change-Order Policies: Understand the process and cost for making plan changes.

5. Review Historical Fee Trends: Evaluate how fees have changed over time and the reasons behind those changes.

6. Benchmark Against Industry Standards: Compare the provider’s fee structure with industry averages.

For a broader checklist, see our guide on how employers evaluate 401(k) plan providers.

Documenting and Communicating Fee Decisions

Clear documentation and communication around 401(k) plan fiduciary responsibilities is not only a best practice, it’s a regulatory expectation.

The Department of Labor recommends that plan sponsors regularly review their fees and communicate changes or updates to participants promptly (U.S. Department of Labor, n.d.).

Regular, transparent communication, whether through internal memos or participant-facing FAQs, helps build trust and supports compliance. Providing educational resources and tools can help participants better understand fee structures and the impact on their retirement savings.

For compliance documentation, see our overview on 408(b)(2) disclosures.

Key Takeaways: Aligning Costs with Governance and Employee Trust

Too many employers focus narrowly on lowering costs without understanding the full governance and communication picture.

Key takeaway: Transparent 401(k) provider pricing and ongoing fee oversight are essential for building trust, supporting compliance, and maximizing the long-term value of your retirement plan.

By adopting these practices, employers protect both their organization and employees’ retirement outcomes.

Failure to monitor and disclose fees can result in breaches of fiduciary duty under ERISA, leading to legal action.

For more on high-performing plan design and provider selection, see our article on the best 401(k) providers for mid-sized companies.

Compliance Note

This content is for informational purposes only and is not legal, tax, investment, or compliance advice.

References

U.S. Department of Labor. (n.d.). A Look At 401(k) Plan Fees. https://www.dol.gov/node/63354

Employee Fiduciary. (2021). Finding Hidden 401(k) Fees in Participant Disclosure Notices. https://www.employeefiduciary.com/blog/finding-hidden-401k-fees-in-participant-disclosure-notices

GAO. (2024). Private Pensions: DOL Should Strengthen Its Oversight of 401(k) Plan Fee Disclosures. https://www.gao.gov/products/gao-24-107125

News Bloomberg Law. (2021). Make Retirement Plan Fee Disclosures Clearer, Watchdog Tells DOL. https://news.bloomberglaw.com/daily-labor-report/make-retirement-plan-fee-disclosures-clearer-watchdog-tells-dol

GAO. (2012). Survey of 401(k) Plan Sponsors on Fees (GAO-12-550SP). https://files.gao.gov/special.pubs/gao-12-550sp/results.htm

GAO. (2011). 401(k) Plans: Improved Regulation Could Better Protect Participants from Conflicts of Interest (GAO-11-119). https://www.gao.gov/assets/a315369.html

GAO. (2021). 401(k) Retirement Plans: Many Participants Do Not Understand Fee Information (GAO-21-357). https://www.gao.gov/products/gao-21-357

U.S. Department of Labor. (n.d.). Meeting Your Fiduciary Responsibilities. https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/publications/meeting-your-fiduciary-responsibilities

Investment Company Institute. (2025). US Equity Fund Fees Continue to Decline Amid Rising Investor Demand for Lower-Cost Options. https://www.ici.org/news-release/25-news-fund-fees-decline