What Does a 401(k) Really Cost? How to Compare Fees Across Providers

From setup, administration and compliance to matching contributions, 401(k) costs can add up quickly depending on your retirement plan provider. Here’s how to evaluate your options, compare fees structures and find the right fit for your business and your employees.

What does a 401(k) plan really cost — and is it worth it?

The answer depends on understanding both the investment you’re making and what you’re getting in return.

Most employers genuinely care about their employees' financial security and want to help drive better retirement outcomes, but plan administration can be time-consuming and costly. In fact, 43% of plan sponsors report that affordability is one of their top three challenges. That’s why comparing provider costs has never been more critical.

The complete picture includes setup expenses, ongoing administration, compliance costs and employer contributions that can significantly impact your bottom line.

Here's what to compare when evaluating 401(k) providers:

1. Setup and onboarding costs

Providers typically charge between $500 and $3,000 for initial plan setup, which covers documentation, employee education, investment lineup selection and payroll system integration.

The structure of these fees depends on the provider's model and what works for your budget.

Bundled providers streamline everything at a flat rate, often waiving setup fees as an incentive. Third-party administrators (TPAs) may offer greater flexibility in fund selection and plan design but charge separately for services. ADP research found that four in 10 plan sponsors would pay an additional fee of up to $1,000 per year to delegate these responsibilities to their recordkeeper or a TPA.

2. Ongoing administrative expenses

Once a plan is operational, you'll encounter recurring fees that keep it running smoothly.

For example, recordkeeping tracks participant contributions, balances, loans and withdrawals, typically costing $45 or more per participant each year. Custodial services execute trades and process contributions and distributions, costing approximately 0.01% to 0.05% of total plan assets annually.

Investment advisory services compensate advisors who monitor fund performance and make selection recommendations, usually ranging from 0.10% to 0.50% of plan assets. Investment management fees for a plan's mutual funds range from 0.05% to 2% or higher of the total assets under management, depending on whether funds are passively or actively managed.

3. Retirement plan compliance and testing requirements

Plans that don't follow safe harbor design rules must undergo annual nondiscrimination testing to ensure contributions don't disproportionately benefit highly compensated employees. This testing ranges from $500 to $1,500 per year and is usually bundled with recordkeeping or TPA services.

Businesses with more than 100 eligible participants are also subject to mandatory annual audits that can cost up to $10,000 or more.

4. Do employers cover all retirement plan fees, or are some passed to participants?

Some businesses choose to absorb all plan expenses. Others charge investment-related costs to employee accounts while covering administrative fees themselves. Many use a shared model where employers handle administrative expenses and participants pay investment fees.

5. Employer matching contributions

Among today’s organizations, employer matching has become a standard expectation. Sixty-two percent of plan sponsors believe that employees should prioritize saving enough in their plan to maximize the company match.

The most common formula matches 100% of the first 3% of employee salary and 50% of the next 2% — a total 4% employer contribution. Small employers with 100 employees or fewer may qualify for tax savings on these matching contributions, helping offset costs.

A simpler retirement plan solution for ultrasmall businesses

Streamlined retirement plan alternatives designed for companies with fewer than five employees make offering benefits more accessible than ever. ADP's Starter-k Complete offers an affordable alternative to traditional 401(k) complexity with straightforward, transparent pricing:

0-4 employees: $100/month with no per-participant fees
5+ employees: $100/month plus $5 per participant
Employers can choose to add additional services to handle certain plan administrative tasks and the selection and monitoring of plan investments.

Beyond competitive pricing, ADP Starter-k Complete delivers valuable plan features like:

Automatic enrollment at 3% makes saving effortless for employees
Simplified compliance through lower contribution limits and no employer match requirement

There's a retirement plan solution for every business

From solo entrepreneurs to large enterprises, ADP offers retirement plans designed for varied needs and budgets. Ready to compare your options? Reach out to an ADP retirement services specialist or call (800) 432-401K to get started.

_{ADP, Inc., and its affiliates do not offer investment, tax, or legal advice to individuals. Nothing contained in this article is intended to be, nor should be construed as, particularized advice or a recommendation or suggestion that you take or not take a particular action. Questions about how laws, regulations, guidance, your plan’s provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor.}

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ADP Retirement Services, Employer Insights on Retirement Plan Benefits, 2025