Go beyond a basic 401(k)

Go beyond a basic 401(k)

Give your employees more than just a 401(k), join the movement.

5 min read

What Are 401(k) Management Fees?

Hazel Gunapala
October 12, 2017
What Are 401(k) Management Fees?
Table of contents

While 401(k)s are a fantastic employer benefit, the unfortunate reality is that they are often riddled with fees that are difficult to understand. As an employer, it’s important to know what you and your employees are paying, and to benchmark your plan to know if you’re overpaying. 401(k) management fees may seem impossible to figure out, but they can be broken down into a few key categories. If you are trying to demystify your current fee disclosure, read up on the categories you should be familiar with below.

## **Fee Categories**
**401(k) Management Fee****How is it Charged?****Who Typically Pays?**
Recordkeeper FeeVariesEmployers
Custodial Fee% of assetsEmployees
TPA FeeVariesVaries
Fund Expenses% of assetsEmployers
Advisory Fee% of assets Varies

Recordkeeper (or “Platform”) Fees

Your recordkeeper is the entity that tracks the different sources of money in your plan. They often act as the plan administrator as well, generating notices for your plan, reporting, etc. Insofar as 401(k) management fees are concerned, the recordkeeper will usually have a flat fee (often called a base or platform fee), coupled with a per participant fee. These administrative costs are most often paid for by the plan sponsor.

Custodial Fees

Custodial fees are charged by (you guessed it) the plan’s custodian. These costs are sometimes outlined as part of the recordkeeping fees, but may also be listed completely separately. In most cases, the custodial fee will be an asset-based fee, meaning that it is charged a percentage of the plan assets. Unlike the recordkeeping fees, these are usually paid for by the plan participants, directly out of their account balance.

TPA fees

If your plan does not use a “bundled” solution where the recordkeeper acts as an administrator, then your plan will use a third party administrator (TPA). TPA fees are generally based on the number of participants in your plan. They can either be paid for by the employer or passed on to employees as a percent of assets invested.

Fund fees

While fund fees may not necessarily fall into the category of a 401(k) management fee, every 401(k) has them so we thought it would make sense to touch on this in our post. Each fund offered in the 401(k) line-up will have an associated expense ratio. This is something that you should pay close attention to, as some funds have additional fees built in, such as commissions and kickbacks (also known as 12b-1 fees) to fund managers or advisors, which can increase the expense ratios unnecessarily.

Advisory fees

If you have an investment advisor on your plan to choose the fund line-up, complete advisory sessions, etc. then you are also paying an advisory fee. This is sometimes charged as a per participant fee, but most often is an asset-based fee (like the custodial fees) that participants pay for out of their plan balance.

Go beyond a basic 401(k)
Give your employees more than just a 401(k), join the movement.
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Hazel Gunapala
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This material has been prepared for informational and educational purposes only and should not be construed as a recommendation by ForUsAll, Inc., its affiliates or employees (collectively, “ForUsAll”)  to activate a cryptocurrency window or invest in crypto.  Investing in crypto can be risky and investors must be able to afford to lose their entire investment.  You should consult with your own advisers before activating a cryptocurrency window or investing in crypto.  ForUsAll does not provide legal, tax, or accounting advice. Please refer to your Plan's fee disclosure for more details.© 2023 ForUsAll, Inc. All rights reserved.
1 Schwab 2022 401(k) Participant Study - Gen Z/Millenial Focus, October 2022.
2 As of 12/31/2022. Employees include both current employees and terminated participants with a balance.
3 "Morgan Stanley At Work: The Value of a Financial Advisor" Morgan Stanley, March 2022.
4 Sarah Britton was a client when she provided this testimonial through an independent third party review website. She received no compensation for her remarks. There are no known conflicts of interest in the provision of her comments related to the services provided.