For many HR teams, one of the most overlooked retirement plan documents is also one of the most important: the 408(b)(2) fee disclosure.

Most plan sponsors receive the document annually, file it away, and rarely revisit it. The challenge is that hidden inside those pages are the fees employees and employers pay to operate the retirement plan.

At Basic Capital, we believe fee transparency is a critical part of retirement plan governance. Understanding what you're paying, who is getting paid, and whether those costs remain reasonable can help employers make more informed decisions about their retirement benefits.

This guide breaks down how to read a 408(b)(2) disclosure, what fee categories matter most, and what HR teams should evaluate when reviewing their current plan.

What Is a 408(b)(2) Fee Disclosure?

A 408(b)(2) disclosure is a document retirement plan providers are required to provide to plan fiduciaries under ERISA.

Its purpose is simple: to help plan sponsors understand the compensation being paid to retirement plan service providers.

The disclosure typically outlines:

• Services being provided

• Direct compensation

• Indirect compensation

• Investment-related fees

• Administrative fees

• Advisory fees

For many HR leaders, this document serves as the primary source of information for evaluating whether retirement plan costs remain reasonable.

When Do You Receive It?

Most employers receive 408(b)(2) disclosures:

• When a retirement plan is established

• When providers are changed

• When material fee changes occur

• During annual plan reviews

Because the disclosure is intended for plan fiduciaries, employers should actively review it rather than simply retaining it for compliance purposes.

The Three Main Fee Categories

Most retirement plan fees fall into three primary buckets.

Understanding these categories makes it much easier to evaluate total plan costs.

1. Recordkeeping and Administrative Fees

These fees cover the operational side of running the retirement plan.

Typical services include:

• Participant account administration

• Payroll integration

• Compliance testing

• Form 5500 support

• Participant communications

• Online account access

Administrative fees may be charged:

• As a flat annual fee

• Per participant

• As a percentage of plan assets

• Through a combination of methods

For many growing businesses, recordkeeping costs become one of the largest retirement plan expenses as employee counts increase.

Questions to Ask

• How are recordkeeping fees calculated?

• Are costs increasing as assets grow?

• Are participant fees being charged separately?

• Are there additional compliance or administrative charges?

2. Investment Fees and Expense Ratios

Investment fees are often the least visible fees participants pay.

These costs are generally embedded within the investment funds themselves and may not appear as separate invoices.

Investment expenses typically cover:

• Portfolio management

• Fund administration

• Investment research

• Trading and operational expenses

These fees are usually expressed as an expense ratio.

For example:

• A fund with a 0.50% expense ratio charges approximately $50 annually for every $10,000 invested

While lower fees are not always better, employers should understand what employees are paying and whether the investment lineup remains appropriate for the plan.

Questions to Ask

• What are the average expense ratios across the plan?

• Are lower-cost alternatives available?

• How often are investment fees reviewed?

• Are participants paying for actively managed funds they may not need?

3. Advisory and Fiduciary Fees

Many retirement plans also include compensation for advisors or fiduciary service providers.

These fees may cover:

• Investment consulting

• Fiduciary support

• Plan reviews

• Governance assistance

• Participant education

• Ongoing retirement plan guidance

Depending on the provider structure, advisory fees may be:

• Asset-based

• Flat fee

• Participant-based

HR teams should understand exactly what services are included and whether those services align with the fees being paid.

Questions to Ask

• What fiduciary services are included?

• Is the advisor serving in a 3(21) or 3(38) role?

• How are advisory fees calculated?

• Are there overlapping provider charges?

What Is a Reasonable Fee?

One of the most common questions employers ask is:

"What should we actually be paying?"

The answer depends on:

• Plan assets

• Participant count

• Service levels

• Fiduciary support

• Investment lineup complexity

Generally speaking, larger plans often benefit from lower percentage-based costs because assets are spread across more participants.

Smaller plans may have higher percentage costs but lower total dollar expenses.

The goal is not necessarily to find the cheapest provider. The goal is to ensure fees remain reasonable relative to the services being delivered.

At Basic Capital, we believe transparency matters as much as cost itself.

A Simple Benchmarking Framework

When reviewing fees, ask:

• Are fees clearly disclosed?

• Do costs make sense relative to plan size?

• Are fees increasing as assets grow?

• Are employees receiving meaningful value from the services provided?

• Have fees been benchmarked recently?

Regular benchmarking helps demonstrate prudent fiduciary oversight.

How to Calculate Your All-In Plan Cost

One useful exercise is calculating total retirement plan costs as a percentage of assets.

A simple formula is:

Total Annual Fees ÷ Total Plan Assets = All-In Cost Percentage

For example:

• Total annual plan fees: $15,000

• Total plan assets: $2,000,000

All-in cost = 0.75%

This approach provides a more complete view of retirement plan expenses than looking at individual fees separately.

HR teams should consider:

• Administrative fees

• Investment expenses

• Advisory fees

• Participant charges

when calculating total costs.

Red Flags to Watch For

When reviewing a 408(b)(2) disclosure, several warning signs may warrant additional investigation.

Limited Fee Transparency

If it is difficult to determine:

• Who is being paid

• How they are being paid

• What services are included

additional clarification may be necessary.

Outdated Benchmarking

If the plan has not undergone a fee review in several years, employers may not know whether costs remain competitive.

Asset-Based Fees That Continue Growing

As plan assets increase, some fee structures can become significantly more expensive even if service levels remain unchanged.

Overlapping Services

Multiple providers may sometimes charge for similar administrative or advisory services.

Understanding who is responsible for what can help identify inefficiencies.

What Modern Fee Transparency Looks Like

At Basic Capital, we believe employers should not need to decode complex fee disclosures to understand what they are paying.

Modern retirement platforms increasingly prioritize:

• Transparent pricing

• Simplified fee structures

• Clear fiduciary responsibilities

• Better visibility into plan costs

• Easier governance oversight

As retirement plans evolve, employers are increasingly looking for retirement partners that make plan economics easier to understand and manage.

Questions HR Teams Should Ask Their Current Provider

Before your next plan review, consider asking:

• Can you explain every fee listed in our 408(b)(2) disclosure?

• How do our fees compare to similar plans?

• Have our fees increased as assets have grown?

• What services are included in our advisory fees?

• How frequently should we benchmark plan costs?

• Are there opportunities to simplify our fee structure?

The answers can often reveal whether your current retirement plan remains aligned with your organization's goals.

Looking Ahead

Understanding your 408(b)(2) fee disclosure is one of the most important steps employers can take to fulfill their fiduciary responsibilities and evaluate the true cost of their retirement plan.

At Basic Capital, we believe retirement plans should provide:

• Fee transparency

• Operational simplicity

• Strong participant experiences

• Clear fiduciary oversight

• Long-term scalability

As retirement plans grow, employers with stronger visibility into fees and provider relationships may be better positioned to support employees while maintaining responsible plan governance.

Ready to see how a modern retirement platform approaches transparency and plan administration? Get started with Basic Capital to learn how our platform helps employers simplify retirement plan management, improve visibility, and support better retirement outcomes.