For mid-sized employers, navigating 401(k) fees is about more than controlling expenses, it’s a key aspect of compliance and fulfilling fiduciary responsibility. As a modern 401(k) platform, Basic Capital works with mid-sized employers to provide clarity around fees while meeting the demands of today’s regulatory environment.

"401(k) plan fiduciaries who haven't recently evaluated their plan's fees and expenses against market standards should strongly consider doing so in 2025, especially given recent legal wins by 401(k) participants." (aswealthmanagement401kadministration.com) This urgency is amplified by the fact that factors such as plan design complexity, investment options, and participant engagement services all help determine where your plan’s fees fall within the industry range.

What Makes a 401(k) Fee “Reasonable” for Employers?

It’s a question nearly every HR and Finance leader faces: What is a reasonable fee for a 401(k) plan? For mid-sized employers, the answer is nuanced, fees can vary based on plan size, services offered, and investment options. According to recent data, for plans with $500k–$1M in assets, the average advisory fee is 0.64% (median: 0.60%), and for $1M–$5M, the average is 0.47% (median: 0.50%) in 2024 (employeefiduciary.com).

Regular benchmarking helps keep your fees competitive and justifiable.

Employers should remember that “reasonable” is not a fixed number, but rather a range that reflects market standards, regulatory expectations, and the value delivered to participants. Factors like plan customization, participant services, and investment selection may move your plan’s fees within this range.

For more on how costs change with business growth, see our guide to how costs scale as your business grows.

The Core Components of 401(k) Plan Fees

401(k) plan fees typically break down into three main categories: administrative, investment, and advisory. For example, administrative fees may include recordkeeping ($30 per participant annually) and compliance testing ($1,000 annually). Investment fees often appear as mutual fund expense ratios, typically around 0.50% of assets under management. Advisory fees are typically asset-based, and recent studies show averages around 0.64% for $500k–$1M plans and 0.47% for $1M–$5M plans in 2024, covering fiduciary support and plan design guidance.

Fee transparency is critical for compliance and participant trust.

Understanding the mix of these fees—and how they’re disclosed—enables employers to manage costs and fulfill their fiduciary obligations. Be aware that some providers use revenue-sharing arrangements, which can reduce visible direct fees but make it harder to assess the true total cost of plan management.

Related reading: see the breakdown of plan administration fees.

How to Benchmark Your 401(k) Fees Against the Market

Benchmarking your 401(k) fee benchmarking practices against the market is a multi-step process that gives you a defensible, data-driven understanding of your plan’s costs. Here’s how mid-sized employers can approach it:

1. Collect Fee Disclosures: Gather all current fee-related documents from your recordkeeper, TPA, and advisor.

2. Compare to Industry Data: Use up-to-date benchmarking studies, like Employee Fiduciary’s 401(k) Fee Study, to see how your plan stacks up.

3. Consult Third-Party Experts: Consider engaging a consultant or fiduciary-grade advisor for an objective assessment.

4. Utilize Online Tools: Fee benchmarking services, such as those offered by Employee Fiduciary, provide comprehensive analysis and actionable recommendations.

Failing to benchmark fees regularly can expose employers to legal risk and fiduciary scrutiny. ERISA requires plan sponsors to act solely in the interest of participants, and courts evaluate whether sponsors prudently monitor fees, including comparisons to market data.

If you want to dive deeper into benchmarking your plan, check out Mid-Market 401(k) Benchmarks (250–1,999 Employees): Fees & Participation.

Common Fee Structures and What Drives Costs for Mid-Sized Employers

Fee structures for mid-sized employer 401(k) costs vary by provider and plan complexity, but the most common include:

• Asset-Based Fees: A percentage of plan assets (e.g., advisory fees average 0.47–0.64% for $1M–$5M and $500k–$1M plans in 2024, per Employee Fiduciary’s study).

• Per-Participant Fees: Fixed annual charges (e.g., $30+ per participant).

• Flat Fees: Fixed monthly or annual amounts, regardless of size.

• Advisory Fees: Often asset-based, averaging about 0.47% for $1M–$5M plans in 2024.

For instance, recordkeeping fees commonly run $30 or more per participant annually, and asset-based fees often decrease as plan assets grow. Employers with more participants may benefit from economies of scale, but complex plan designs or extra features can drive costs up. For example, offering participant loans or an expanded range of investment options may increase administrative fees.

For a deeper dive into balancing fee structures, see Participant Fees vs Employer Fees: Getting the Balance Right.

Legal Risks and Fiduciary Duties: Why Fee Reasonableness Matters

Prudent process and transparency are the foundation of a sound fiduciary approach. As one recent industry authority noted, “401(k) plan fiduciaries who haven't recently evaluated their plan's fees and expenses against market standards should strongly consider doing so in 2025, especially given recent legal wins by 401(k) participants.” (aswealthmanagement401kadministration.com)

A recent example is UnitedHealth Group’s $69 million settlement in a class-action lawsuit alleging breaches of fiduciary duties under ERISA—the case centered on retaining underperforming funds due to financial ties (sanfordheisler.com). While UnitedHealth is a large employer, the takeaway for mid-sized firms is clear: failing to review and benchmark plan fees can lead to substantial reputational and financial risk.

Cases such as TriNet and Fujitsu show the value of active fee monitoring and transparent documentation in avoiding lawsuits and negative outcomes.

For more on employer fiduciary responsibilities, see What Employers Need to Know About 408(b)(2) Disclosures.

Best Practices for Ongoing Fee Governance

Fee governance is not a one-time project, it’s an ongoing process of review and documentation. Maintaining a Fee Policy Statement, benchmarking regularly, and communicating clearly with plan participants are considered industry best practices. Your fee policy statement should also address the monitoring of indirect compensation mechanisms like revenue sharing, to maintain transparency.

As one recent study observed, "Fiduciary-grade investment advice lowers the total cost of 401(k) plans, resulting in higher returns for participants and more savings to compound until retirement." (prnewswire.com)

Employers can further reduce risk and costs by leveraging benchmarking tools and independent reviews. For practical steps and templates to operationalize fee governance, see A Practical Guide to 401(k) Fee Disclosures for Employers.

Real-World Lessons: What Recent 401(k) Fee Cases Teach Us

Legal cases provide powerful reminders of what’s at stake. In the UnitedHealth Group case, the company paid $69 million to settle claims of excessive fees and conflicts of interest, highlighting how failure to monitor and benchmark fees can trigger costly litigation. With Department of Labor audits and participant awareness on the rise, the risk environment for employers remains high.

While specific mid-sized employer case studies with before/after comparisons are scarce, industry reports and anonymized examples show that diligent fee reviews and competitive bidding can yield significant savings and risk reduction.

For further reading on how fee litigation can impact your business, see 401(k) Provider Pricing: True Costs for Employers vs Employees.

Conclusion & Next Steps for Employers

Fee benchmarking is a best practice to support compliance, a cost-control tool, and a vital part of your fiduciary duty as a plan sponsor. Regulators are continuing to evaluate and enhance fee disclosure standards, so keeping your plan documentation up to date is essential.

By regularly reviewing fees against industry standards, leveraging benchmarking tools, and maintaining clear documentation, employers can protect both their organization and their employees’ retirement outcomes.

To take the next step in optimizing your plan, Get started (for employers).

References

Employee Fiduciary. (2024). 401(k) Advisor Fee Study. https://www.employeefiduciary.com/blog/401k-advisor-fee-study

AS Wealth Management. (2024). 401(k) Benchmarking. https://aswealthmanagement401kadministration.com/401k-benchmarking/

PR Newswire. (2024). Employee Fiduciary’s Latest Study Reveals How Fiduciary Advice Reduces 401(k) Plan Costs. https://www.prnewswire.com/news-releases/employee-fiduciarys-latest-study-reveals-how-fiduciary-advice-reduces-401k-plan-costs-302154628.html

Basic Capital. (2024). Mid-Market 401(k) Benchmarks: Fees & Participation. https://basiccapital.com/401k-resources/mid-market-401k-benchmarks-fees-participation

Sanford Heisler Sharp McKnight LLP. (2025). Final Approval of Record-Breaking $69 Million Settlement on Behalf of UnitedHealth Group 401(k) Participants. https://sanfordheisler.com/case/financial-services-litigation/unitedhealth-certified-erisa-class-action/