There is no such thing as a FREE 401(k) plan

October 15, 2021

Do you know the real cost of your plan?

401(k) plans are attractive to employers for retaining and recruiting employees, but all 401(k) plans come with a price. No surprise, right? Yet, costs shouldn’t prevent you from offering this benefit to your employees, just try to be fully informed prior to selecting your plan.

Before committing to any plan, you deserve to have all costs and fees disclosed. Even if you are presented with a plan that is easy to administer and seemingly affordable with very few fees, there are hidden costs.

You can expect a one-time setup fee, plus additional fees for fund management and administration services (like record-keeping, compliance, fund maintenance).

You may decide to hire an administrator to maintain your plan, including providing informational materials, statements, completion and submission of government forms, fulfilling nondiscrimination testing requirements, approving loans and distributions, etc.

Depending on the size of your plan, you may be required to hire an external auditor to review your plan documents and operations to ensure you are in compliance.

Ask the right questions before you sign on!

Ask for precise information about costs and fees upfront. In addition to the set-up fee, you’ll want to know exactly what fees you will be charged, and what potential costs you’ll have in the future, such as audits.

How does the plan provider generate income? Do they charge a flat rate, or does their revenue depend on the amount of assets in the plan, on the number of participants, or on administration fees and transaction commissions? Or some combination of the above?

Will your funds be actively or passively managed? Actively managed funds involve continuous research, assessment, and more frequent trading of funds for higher returns. Passively managed funds generally duplicate the funds held in an established market index to achieve similar results and have lower fees based on less trading activity.

Are there any miscellaneous fees you should know about, such as consulting fees for investment advice, or additional fees for loans, rollovers, and withdrawals?

Other costs may be incurred to maintain a plan, such as payment for an annual ERISA bond. And finally, there will be the cost of your own in-house human resources and bookkeeping personnel, plus employee questions and concerns to be handled.

And yet, you still may be surprised by fees you didn’t anticipate, such as the cost of integrating your plan into your payroll platform, changing or amending your plan, or even plan termination. 

Your employees will incur costs as well

As the plan sponsor, you have a fiduciary duty to be certain your employees’ fees are reasonable and validated. 

Your employees will pay fees for info on the daily value of their accounts, for trading, and for information about matching funds and the pre-tax and after-tax status of their savings.

Additionally, they will pay management fees for investment options selected. They may pay loan and distribution fees. And they may pay advisory fees for fiduciary support, investment reviews, and education.

You’ll want to know their fees are within reason. These costs will impact their opinion of the plan and their willingness to participate. 

The benefits are well-worth the effort

If this sounds like a huge learning curve to undertake, don’t be discouraged! A satisfying 401(k) plan is worth the time and effort it takes to establish. It will provide an important benefit to your employees, helping them save for their retirement years. It also will provide them with savings to draw from for essential purchases or medical emergencies.

By taking the time now to gather all the information you need to select the right plan, (and really know what you’re signing up for), your company, your employees, and you personally will reap big benefits. 

Still need help selecting the right 401(k) plan for your company? Cassell Plan Audits is here to help! Contact us at 630.886.7669 for more information and to schedule your visual appointment.


Don’t spend another year working with an unfriendly auditor who doesn’t have your best interests at heart. Contact us today for more information and to schedule your virtual appointment with Cassell Plan Audits at 630.886.7669.  

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