401(k) Fees: What’s Reasonable? A CFO’s Guide to Benchmarking Costs in Mid-Market and Large Companies
One of the most common questions from finance leaders is simple: what’s a reasonable 401(k) fee? The answer isn’t one-size-fits-all but benchmarking fees, understanding what drives them, and implementing cost-containment strategies can save companies millions of dollars over time, while keeping plans compliant and competitive.
Benchmarking 401(k) Fees
401(k) plans are governed by strict fiduciary standards. The Department of Labor (DOL) requires plan sponsors to ensure that fees paid by the plan are “reasonable” in relation to the services provided.
For CFOs, this means:
- Cost control: Excessive fees reduce participant balances and can erode employee trust.
- Compliance: Failure to monitor fees exposes the company to regulatory and legal risk.
- Attraction & retention: Employees actively compare retirement plan value across employers.
What Is Considered a “Reasonable” 401(k) Fee?
Industry data shows a wide range depending on plan size:
| Plan Size (Assets) | Typical All-In Fee % | Example Range (bps) | Notes |
| <$5M | 1.00% – 1.50% | 100–150 | Higher due to scale limitations |
| $5M–$50M | 0.50% – 1.00% | 50–100 | Most mid-market plans fall here |
| $50M–$250M | 0.25% – 0.50% | 25–50 | Larger plans benefit from economies of scale |
| $250M+ | 0.10% – 0.25% | 10–25 | Institutional pricing tiers |
Rule of thumb for CFOs:
- A mid-market plan ($10M–$100M) should target 0.35%–0.70% all-in.
- Large plans ($100M+) should trend below 0.40% all-in.
Breaking Down 401(k) Retirement Plan Fee Components
CFOs should look at total plan cost across three buckets:
- Recordkeeping & Administration
- Technology platform, compliance testing, payroll integration, reporting.
- Often charged as a per-head fee ($40–$80/participant) or basis points on assets.
- Investment Management Fees
- Expense ratios of mutual funds, CITs, or index funds.
- Can range from <0.05% (institutional index funds) to >1.00% (actively managed funds).
- Advisory & Consulting Fees
- Benchmarking, fiduciary oversight, plan design, employee education.
- Typically 0.10%–0.40% depending on scope and size.
How CFOs Can Benchmark and Reduce Fees
PolicySmart recommends a structured fee review every 2–3 years. Key strategies include:
- Benchmark against peers: Compare to companies of similar size and industry.
- Leverage scale: As assets grow, renegotiate pricing with recordkeepers and investment managers.
- Evaluate investment menus: Move from high-fee mutual funds to institutional index funds or CITs.
- Consider unbundling: Separating recordkeeping from investments often reduces hidden costs.
- Independent review: Partner with an unbiased consultant, not just the existing broker, to ensure transparency.
FAQ: 401(k) Fees for CFOs
Q: What’s the average 401(k) fee for a mid-market company?
A: Mid-market companies ($10M–$100M in plan assets) typically pay 0.35%–0.70% all-in.
Q: How do I know if my company is overpaying?
A: Compare against industry benchmarks, request a full fee disclosure (408(b)(2) report), and have an independent consultant review.
Q: Are lower fees always better?
A: Not necessarily. The DOL standard is “reasonable,” which considers both price and quality of services delivered.
Q: How often should fees be benchmarked?
A: Every 2–3 years, or sooner if plan assets grow significantly or new providers enter the market.
Q: What are hidden 401(k) fees CFOs should watch for?
A: Revenue sharing embedded in fund expense ratios, wrap fees, and recordkeeper revenue credits.
Final Word for CFOs Who Want to Save on 401(k) Fees
Reducing 401(k) fees improves employee retirement outcomes, strengthens recruiting and retention, and protects your company from fiduciary risk.
At PolicySmart, we don’t sell retirement plans. We fix them. We benchmark, compare, and connect CFOs with the right retirement plan partners for their size, industry, and workforce.