How Much Should a 401(k) Plan Cost? A Fee Walkthrough
It is the question plan sponsors ask most, and the one the industry answers least directly. Here is the honest version: ERISA does not require the lowest fees; it requires fees that are reasonable for the services received. You cannot make that judgment until you know what your plan pays, and for what.
The three fee buckets
Nearly every plan's costs fall into three buckets. Recordkeeping and administration runs the platform — accounts, statements, testing, Form 5500. Investment management is the funds' expense ratios, taken from returns before anyone sees them. Advisory is the consultant or fiduciary attached to the plan. The trouble is how they're paid. Revenue sharing routes part of a fund's expense ratio back to the recordkeeper or advisor. Two plans with the same sticker price can carry very different true costs.
What drives the price
- Scale. Assets and headcount move pricing tiers; per-participant economics improve sharply as a plan grows.
- Share class. The same fund often exists in cheaper share classes than the plan is using.
- Service model. Bundled trades transparency for convenience; unbundled itemizes what each party earns.
- Time since the last market check. Recordkeeping pricing has compressed for years — plans that haven't been to market are paying yesterday's rates.
When fees become a fiduciary problem
Excessive-fee litigation — including Hughes v. Northwestern — has settled one point: you cannot defend fees you never examined. The cases rarely turn on whether a plan was cheapest. They turn on whether the committee can produce a prudent process: periodic benchmarking, documented review, and action when pricing drifts.
How to find out what you actually pay
Start with each provider's 408(b)(2) disclosure, then have the total restated independently — all three buckets, with revenue sharing unwound and tested against live market pricing, not a stale survey median.
This is where independence earns its keep. Regency is fee-only and open-architecture. We hold no proprietary funds and take no pay from any recordkeeper, so the figure we hand you answers to your plan and nothing else. Our screening runs across 118 vendors, and it has recovered more than $12 million for plan sponsors.
Common questions
Who actually pays 401(k) fees — the employer or the employees?
Both, depending on plan design. Administrative costs may be billed to the company or deducted from participant accounts; investment expense ratios are always borne by participants. Much of the total typically flows through participant balances — which is exactly why ERISA holds fiduciaries responsible for keeping it reasonable.
What is revenue sharing?
An arrangement where part of a fund's expense ratio is paid back to the recordkeeper or advisor. It is legal, but it hides who earns what and ties compensation to fund selection rather than services. A proper benchmark restates revenue sharing into hard dollars.
Is the cheapest provider the right answer?
No. ERISA requires reasonable fees, not minimal ones. A rock-bottom recordkeeper with weak compliance support can cost far more in corrections and risk than it saves. The goal is documented value, not the lowest bid.
How do I find out what my plan is paying today?
Request the 408(b)(2) disclosures from each provider, then have the all-in total restated independently — all three buckets, revenue sharing unwound — and benchmarked against live market pricing. An independent, fee-only consultant can reconstruct it.
Speak with Regency.
Questions about this topic as it relates to your plan? We welcome the conversation.