Benchmarking 401(k) fees helps employers determine whether plan costs are reasonable, evaluate provider value, and fulfill fiduciary responsibilities through regular fee reviews.
Many employers know they should review their 401(k) fees, but far fewer know what "reasonable" actually means.
Without context, it can be difficult to determine whether your retirement plan is competitively priced or whether participants are paying more than necessary. Adding to the challenge, retirement plan fees are often spread across multiple disclosures and service providers, making benchmarking feel more complicated than it should be.
At Basic Capital, we believe fee benchmarking is one of the most important fiduciary responsibilities a plan sponsor can perform. Regular benchmarking helps employers understand total plan costs, evaluate provider value, and identify opportunities to improve participant outcomes.
This guide explains how 401(k) fee benchmarking works, what fee ranges are common for small and mid-sized businesses, and what employers should evaluate beyond cost alone.
Why Fee Benchmarking Matters
Under ERISA, plan sponsors are responsible for ensuring that retirement plan fees remain reasonable relative to the services provided.
Importantly, reasonable does not necessarily mean cheapest.
A retirement plan with higher fees may still provide strong value if it includes:
Fiduciary support
Compliance assistance
Employee education
Enhanced technology
Better participant outcomes
The goal of benchmarking is not to find the lowest-cost provider. The goal is to understand whether the plan's fees align with industry norms and the services being delivered.
At Basic Capital, we often recommend reviewing fees regularly rather than waiting until concerns arise.
What Fees Should Be Benchmarked?
Many employers focus only on recordkeeping costs, but true benchmarking should evaluate the plan's total cost.
This generally includes:
Recordkeeping and Administrative Fees
These fees support:
Participant account administration
Payroll integrations
Compliance support
Reporting
Plan administration
Investment Fees
These costs are typically embedded within investment funds and appear as expense ratios.
Investment fees can vary significantly depending on:
Fund selection
Active vs. passive management
Share class availability
Investment menu design
Advisory and Fiduciary Fees
Some plans include additional fees for:
Investment advice
Fiduciary services
Governance support
Participant education
The most effective benchmarking process evaluates all fee categories together.
What Drives 401(k) Fee Levels?
Retirement plan pricing is influenced by several factors.
Plan Assets
Generally speaking, larger plans often benefit from lower percentage-based fees because providers can spread costs across a larger asset base.
Number of Participants
Plans with more participants may have different pricing structures than plans with fewer employees.
Service Levels
Additional services may increase costs, including:
3(38) fiduciary support
Compliance consulting
Participant education
Dedicated account management
Investment Menu Design
Investment fees vary depending on the funds available within the plan.
Plans using institutional share classes or low-cost index funds may have lower investment expenses than plans with more actively managed investment options.
Typical 401(k) Fee Ranges by Plan Size
While every plan is unique, the following ranges can provide a general benchmark for total all-in plan costs.
Estimated All-In Annual Fees
Plan Assets | Typical All-In Fee Range |
|---|---|
Under $1 Million | 1.00% – 2.00% |
$1M – $5M | 0.75% – 1.50% |
$5M – $10M | 0.50% – 1.00% |
$10M – $50M | 0.40% – 0.80% |
$50M+ | 0.25% – 0.60% |
These ranges typically include:
Recordkeeping fees
Investment expenses
Advisory fees
Actual costs vary based on plan design and provider structure.
Benchmarking by Company Size
Employers often find it helpful to compare costs against organizations of similar size.
Small Employers (10–50 Employees)
Common characteristics:
Newer plans
Lower asset balances
Simpler plan designs
Typical total fees often range between:
0.90%–1.75%
Growing Employers (50–250 Employees)
These plans often benefit from:
Greater purchasing power
Higher participant counts
Increased assets
Typical total fees often range between:
0.60%–1.25%
Mid-Sized Employers (250–500 Employees)
As plans mature, employers may gain access to:
Lower-cost share classes
Enhanced fiduciary services
More competitive pricing structures
Typical total fees often range between:
0.40%–1.00%
Benchmarking should always consider both plan assets and participant counts rather than employee headcount alone.
How to Calculate Your All-In Cost
One of the simplest benchmarking exercises is calculating total plan expenses.
A basic formula is:
Recordkeeping Fees + Investment Fees + Advisory Fees = Total Plan Cost
For example:
Fee Category | Cost |
|---|---|
Recordkeeping | 0.20% |
Investment Expenses | 0.35% |
Advisory Services | 0.25% |
Total Cost | 0.80% |
This calculation provides a much clearer picture than reviewing fee categories individually.
Questions Every Employer Should Ask
Benchmarking is not simply about comparing percentages.
Employers should also evaluate:
Are Fees Transparent?
Can you easily identify:
What employers pay
What participants pay
What services are included
If fee structures are difficult to understand, that may warrant further review.
Have Fees Changed as Assets Grew?
Some plans become increasingly expensive as assets grow despite little change in service levels.
Periodic reviews help identify whether pricing remains aligned with value.
Are Services Worth the Cost?
Higher fees may be reasonable if they support:
Better compliance oversight
Improved participant engagement
Fiduciary support
Administrative efficiency
Benchmarking should evaluate value as well as cost.
Common Fee Benchmarking Mistakes
Looking Only at Recordkeeping Fees
Many employers overlook investment and advisory costs.
True benchmarking requires evaluating total expenses.
Ignoring Share Classes
Two versions of the same investment fund may have significantly different expense ratios.
Periodic reviews can uncover opportunities to reduce participant costs.
Benchmarking Too Infrequently
A plan that was competitively priced several years ago may no longer be competitive today.
Many employers conduct benchmarking every few years as part of their fiduciary review process.
Focusing Exclusively on Price
The lowest-cost provider is not always the best choice.
Service quality, compliance support, participant experience, and fiduciary services all contribute to overall value.
Understanding Your Fee Disclosures
Before benchmarking, employers should understand exactly what fees they are paying.
Companies looking for a deeper explanation of retirement plan fee disclosures may also benefit from reading our Practical Guide to 401(k) Fee Disclosures for Employers.
Understanding 408(b)(2) and related fee disclosures often makes benchmarking significantly easier and more accurate.
Building a More Competitive Retirement Plan
Fee benchmarking is not about reducing costs at all costs.
It is about ensuring your retirement plan remains competitive, transparent, and aligned with the needs of both the business and its employees.
At Basic Capital, we believe employers should have clear visibility into retirement plan pricing and confidence that fees remain reasonable relative to the value being delivered.
Companies evaluating retirement plan modernization can also explore our For Employers resources to learn how modern retirement infrastructure supports transparency, compliance, and employee engagement.
Making Fee Reviews Part of Good Governance
Regular fee benchmarking is one of the simplest ways employers can strengthen fiduciary oversight and improve retirement plan governance.
By understanding how your plan compares to similar organizations, evaluating total costs rather than individual fees, and documenting the review process, employers can make more informed decisions about provider relationships and participant outcomes.
At Basic Capital, we believe stronger transparency leads to stronger retirement plans.
Ready to learn how a modern retirement platform approaches pricing, governance, and retirement plan administration? Get started with Basic Capital to see how we help employers simplify retirement plan management and support better retirement outcomes.
