Small 401(k) plans pay far more in admin costs, study finds

A new analysis of 48,944 401(k) filings shows smaller plans pay sharply more to administer retirement benefits, with nearly one in three small and mid-sized plans paying more than twice the median cost per participant. The findings matter for employers and fiduciaries weighing whether plan fees are reasonable under ERISA.

Why it matters: - Smaller employers appear to pay far more per worker to run 401(k) plans, raising pressure on fiduciaries to benchmark fees and justify plan compensation. - The study says many costs may be hidden inside investment expenses and revenue sharing, not just line-item invoices. - The findings land in the middle of ongoing scrutiny of retirement plan expenses and fiduciary duty under ERISA.

What happened: - Admin316 analyzed 48,944 plan year 2024 Form 5500 filings submitted to the U.S. Department of Labor. - The data covered 401(k) plans with 25 or more active participants that reported both administrative expenses and end-of-year assets. - Across the plans analyzed, the median administrative cost was $162 per participant per year, or 27.0 basis points of plan assets. - Plans with 25 to 99 active participants had a median cost of $364 per participant. - Plans with 500 or more active participants had a median cost of $104 per participant. - Among the 34,423 plans with fewer than 500 active participants, 30.6% paid more than twice the national median per participant. - That equals about 10,500 plans paying above $324 per person.

The details: - The smallest plan group paid a median of 32.5 basis points of assets, compared with 18.6 basis points for the largest group. - At the 90th percentile of the 25-to-99 participant group, administrative cost reached $977 per participant. - Admin316 said a 70-person plan at that level would spend roughly $68,000 a year. - Fewer than half of plans analyzed reported a contract administrator fee, at 45%. - Just over half reported recordkeeping fees, at 56%. - Admin316 said those figures suggest a substantial share of plan compensation is paid indirectly through investment expenses and revenue sharing. - The company said the figures come from public federal filings signed under penalty of perjury, not survey responses.

Between the lines: - The study’s headline gap is not just about plan size. Smaller plans also paid more relative to assets, which weakens the argument that fixed costs alone explain the difference. - Russell McNorton, founder and CEO of Admin316, said ERISA does not require a fiduciary to pick the cheapest provider, but does require a reasonable compensation review. - McNorton also said sponsors often miss indirect compensation because no invoice arrives at the employer. - The analysis has a built-in limitation: the smallest plans may file Form 5500-SF, which does not require the same expense detail as Schedule H. - That means the 25-to-99 participant group reflects small plans filing a full Schedule H, not every small 401(k) plan in the country.

What's next: - Admin316 said this is the first in a series of monthly data releases planned through 2026 and 2027. - The research is tied to McNorton’s forthcoming book on employer fiduciary responsibility under ERISA, "Who Is Your Named Fiduciary?" - The firm said journalists can request methodology, plan-size figures, and comment on fiduciary duty, Form 5500 reporting, fee benchmarking and 3(16) administration at Admin316 newsroom.

The bottom line: - For small and mid-sized 401(k) plans, the cost difference is large enough that fee oversight can no longer be treated as a back-office issue.