---
title: "How Employers Can Reduce 401(k) Fees with a Benchmark Analysis"
date: 2025-03-13
author: "siteadmn"
featured_image: "https://contempohcm.com/wp-content/uploads/2025/03/2025-0313-Contempo_Employers_Guard-against-high-401k-fees-with-a-benchmark-analysis-1.jpg"
categories:
  - name: "Wage Compliance"
    url: "/category/wage-compliance.md"
tags:
  - name: "401(k)"
    url: "/tag/401k.md"
  - name: "retirement plans"
    url: "/tag/retirement-plans.md"
---

# How Employers Can Reduce 401(k) Fees with a Benchmark Analysis

If your organization offers a **401(k) or similar retirement plan**, you’re likely familiar with the administrative fees that come with it. But have you ever questioned whether you’re paying too much?

A study by **Abernathy Daley 401k Consultants** analyzed IRS Form 5500 filings from over **6,500 companies with 100+ employees** and found that nearly **80% of employers overpay** on administrative fees for their **401(k) or 403(b) plans**.

Overpaying on fees not only strains your company’s cash flow but could also **expose you to legal risks**. Employees who discover excessive fees may file lawsuits, alleging a breach of fiduciary duty. One of the most effective ways to prevent this issue is by conducting a **401(k) benchmark analysis**.

## What Is a 401(k) Benchmark Analysis?

A **benchmark analysis** evaluates your plan’s **fees, services, and investment performance**, comparing them to industry standards for similar-sized companies and plans. This analysis applies to **401(k), 403(b), 457, and defined benefit (pension) plans**.

The goal is two-fold:

1. **Ensure cost-effectiveness** – Identify whether you’re paying **competitive** administrative, investment, and consulting fees.
2. **Demonstrate fiduciary compliance** – Show that you’re acting in the best interests of plan participants and **fulfilling your fiduciary duty**.

Since **fiduciary responsibility** is a legal obligation, failing to **monitor and control plan costs** could result in lawsuits, regulatory penalties, or employee dissatisfaction that impacts retention.

## How to Conduct a 401(k) Benchmark Analysis

Many employers **lack the internal expertise** to conduct a thorough analysis, so they partner with **third-party specialists**. Here’s what to expect:

### **1. Gather Plan Cost Data**

All plan-related expenses—including **administrative fees, investment costs, and advisory fees**—are identified and documented. If you use a **third-party administrator (TPA),** request a detailed fee disclosure report.

👉 **Tip:** Some TPAs include **benchmarking services** as part of their offerings—check before hiring an outside consultant.

### **2. Compare Fees to Industry Standards**

Your plan’s costs are evaluated against **industry benchmarks** based on data from **federal regulations, trade associations, and third-party studies**. This determines whether your fees are **aligned, competitive, or excessive** compared to similar plans.

### **3. Assess Investment & Service Quality**

Beyond fees, a thorough analysis examines:

- **Investment performance** and fund expense ratios
- **Plan participant resources**, such as education and support
- **Regulatory compliance**, including required disclosures

### **4. Receive Recommendations**

Based on the findings, recommendations may include:

- **Negotiating lower fees** with your current provider
- **Switching plan providers** for better pricing or services
- **Improving investment options** for participants
- **Enhancing fiduciary compliance** to reduce legal risks

### **5. Document Findings & Next Steps**

A written **benchmarking report** summarizes findings, provides detailed recommendations, and serves as **critical documentation** in case of audits or lawsuits.

## Why Regular Benchmarking Matters

If your business **discovered overpayments** on utilities or office supplies, you’d take action immediately. The same should apply to **401(k) fees**.

Conducting a **401(k) benchmark analysis every 1–3 years** can:  
✅ **Lower plan expenses** and improve cost efficiency  
✅ **Protect your company from fiduciary liability**  
✅ **Enhance employee satisfaction** with better plan value

Don’t leave your retirement plan fees unchecked. **Contact us today** for expert guidance on conducting a benchmark analysis and optimizing your plan’s costs.

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