5 Strategies to Help Lower High Fees in Your 401(k) Plan

The landscape of employee retirement planning witnessed a significant milestone in 2025, as the average 401(k) balance reached an unprecedented peak of $112,400. This impressive figure underscores the pivotal role that 401(k) plans play in shaping the financial future of countless employees.

Amid this backdrop, however, lies a less discussed yet equally critical aspect—the impact of high fees on these retirement savings. 401(k) plans are a cornerstone of many retirement strategies, yet the detrimental impact of high fees on investment gains is an increasing worry. For employers, the challenge lies not only in providing a 401(k) plan but also in ensuring its cost-effectiveness and robustness.

In this post, we’ll explore five key methods to curb the steep fees typically found in 401(k) plans. By adopting these strategies, employers can boost the efficacy of their retirement plans, thereby protecting and enhancing their employees’ retirement funds.

Understanding and Negotiating 12b-1 Fees

A critical component in managing 401(k) plan costs is the understanding of 12b-1 fees. These fees, often embedded within mutual funds, are used for marketing and distribution expenses and can vary significantly between funds. While they may seem minimal, over time, 12b-1 fees can accumulate and significantly impact the total cost of the plan.

Employers have the opportunity to negotiate these fees or opt for funds that levy lower or no 12b-1 fees. This approach requires a keen understanding of the fee structures and the negotiation skills to strike a deal that favors the employees without compromising the quality of the investment options.

Choosing a Cost-Effective Plan Administrator

The selection of a plan administrator is another vital decision impacting 401(k) fees. These administrators play a crucial role in managing the plan, and their fee structures can greatly vary. It’s important for employers to conduct thorough research and compare different administrators, focusing on the balance between cost and the quality of services provided.

The goal is to find a plan administrator who offers competitive pricing along with robust services that ensure the plan operates smoothly and complies with regulatory requirements.

Streamlining Investment Options

Rethinking the investment lineup in a 401(k) plan can significantly reduce fees. The assumption that a plethora of investment options signifies a better plan is often misguided. A more beneficial strategy is to curate a selection of funds that reduces fees and still offers a diverse range of choices to meet various investment objectives and risk appetites.

Employers should consider the needs and financial literacy of their workforce when selecting these options. By providing a range of investment choices that are both diverse and manageable, employers can ensure that the plan remains user-friendly and cost-efficient. This balanced approach helps optimize the plan for the benefit of all employees, regardless of their investment savvy.

Regularly Reviewing Plan Performance and Costs

An often-overlooked aspect of managing a 401(k) plan is the importance of regular reviews. These periodic assessments allow employers to keep a pulse on the plan’s performance and identify opportunities to reduce fees.

It’s not just about looking at the returns but also understanding how the fees are impacting the overall cost of the plan. Involving financial advisors or consultants in this process can provide an external perspective and expertise in identifying cost-saving opportunities and ensuring the plan remains competitive and beneficial for employees.

Educating Employees on Investment Choices

It’s crucial for employees to be well-informed about their 401(k) plan’s investment options to optimize the plan’s performance. By comprehending the consequences of their investment decisions, employees tend to choose options that not only meet their retirement goals but are also cost-effective.

Implementing comprehensive educational programs or offering accessible resources can significantly enhance employee understanding of complex financial concepts and the impact of fees. This education goes beyond simple plan mechanics; it should encompass broader financial literacy to enable employees to make informed decisions about their retirement planning.

Not only does this lead to reduced costs through more judicious investment selections but it also increases employee engagement and satisfaction with the plan. An educated workforce is a more financially secure workforce, benefiting both the individual and the organization as a whole.

Final Thoughts

The strategies outlined above offer a roadmap for employers to tackle the challenge of high fees in their 401(k) plans. From negotiating 12b-1 fees to educating employees about their investment choices, each strategy plays a crucial role in ensuring that the plan remains a valuable, cost-effective tool for retirement savings.

Employers need to actively oversee their 401(k) plans, bearing in mind these strategies to amplify the plan’s value for both the organization and its employees. Such proactive management not only bolsters the financial health of the workforce but also reinforces the appeal of the company’s overall benefits offering.