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:
- Ensure cost-effectiveness – Identify whether you’re paying competitive administrative, investment, and consulting fees.
- 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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