In recent years, a lot of media attention has been focused on 401(k) cost and the fees business owners and their employees are paying for 401(k) investments and recordkeeping services – and for good reason.

Differences in fees as small as 0.1% per year can lower your account balance by thousands of dollars by the time you retire.

Fee example: Assume an employee with 35 years until retirement has a current 401(k) account balance of $25,000 and earns an average investment return of 7% per year until retirement. Without any additional contributions, here is how 401(k) fees could affect the account balance at retirement.

Total 401(k) Fees
Account balance





Department of Labor, A Look at 401(k) Plan Fees

Small business 401(k) plan fees

Small businesses are overlooked in the 401(k) industry and charged higher fees because they have fewer employee participants and smaller account balances. At Ubiquity Retirement + Savings, helping small businesses with affordable retirement plans is all we do. Ubiquity was the first in the industry to offer small businesses a flat fee retirement plan. We also offer a diverse group of investments for you to choose from. Our goal is to help small business start and maintain 401(k) plans in a way that saves time and money, so employers and employees can grow their retirement savings.

Understanding 401(k) costs and fees

It is important to understand the types of fees that may be assessed in a 401(k) plan and who can pay those fees, so you can make smart choices when it comes to your retirement savings. In fact, the retirement plan rules require the employer offering the plan to keep an eye on plan costs to ensure they are reasonable based on the services received. The employer must pay some 401(k) fees, and some are deducted from employees’ 401(k) accounts. Here are the fees that typically occur in a 401(k) plan and how they can be paid.

Type of Fee
Who Pays

Plan Administration Fees

Fees for day-to-day operation of the plan, including recordkeeping and trustee services

May be paid by employer or from plan’s assets (debited from employees’ accounts)

Investment Fees

Fees for investment management, marketing, and distribution of an investment product, including sales charges or commissions

Deducted directly from investment returns in employees’ accounts

Individual Service Fees

Fees for a transaction or service affecting one employee (e.g., loan, investment advice)

Typically charged to the affected employee’s account, but may be paid by the employer

Settlor Fees

Fees for services primarily benefiting the business (e.g., forming the plan, tax consulting)

Must be paid by employer

Keep an eye on your 401(k) fees and the fine print

Once you understand what types of fees you are paying, either as the business owner of the 401(k) plan or as a saver in the plan, it is also essential to keep an eye on plan costs over time to ensure you continue to receive the best value. This is especially true for investment fees because they usually make up the largest portion of expenses in a 401(k) plan.

Employers, with the assistance of their service providers, must provide information about 401(k) fees to employees who save in the 401(k) plan. Employees can also find an explanation of fees charged to their accounts in their quarterly account statements, which is an IRS requirement.

Claim your tax credits

To help pay for 401(k) costs, and as another incentive to save for retirement, the IRS provides tax credits for employers and employees who start and save in a 401(k) plan.

Employers – Certain employers can claim a tax credit for up to 100% of the costs of setting up and administering a plan and educating employees about the plan. Up to a maximum of $500 per year may be claimed for three years. To be eligible for the credit, the business must meet the following requirements:

  • No more than 100 employees who received $5,000 or more in pay last year
  • At least one employee who owns less than 5% of the company and who earned less than $150,000 last year
  • No retirement plan for your employees in the last three years

Everything you need to know about 401(k) fees and cost.

If your business does not qualify for the tax credit, you may be able to deduct the startup costs as a business expense.


Employees, including business owners, can claim up to a $1,000 tax credit ($2,000 for those filing jointly) each year for making 401(k) and IRA contributions if they are age 18 or older, not a full-time student, and not a dependent on another person’s tax return. To be eligible for the tax credit for 2023, your income must be less than $73,000 if you are married, and $36,500 if you are single. The IRS adjusts these amounts for inflation each year.