How Much Does a 401(k) Cost a Business
The honest answer is “it depends,” but you can still budget with confidence if you understand the main fee categories and what typical pricing looks like for small, mid-sized, and larger plans.
Starting (or reviewing) a 401(k) plan often comes down to one question: How much does a 401(k) cost for a business? The honest answer is “it depends,” but you can still budget with confidence if you understand the main fee categories and what typical pricing looks like for small, mid-sized, and larger plans.
Below is a practical breakdown of common 401(k) fees, real-world cost ranges, and examples of how plan administrators typically price services. If you’re also comparing providers, it’s worth working with a specialist—here’s a helpful guide on how to hire a retirement plan advisor.
What makes up the cost of a 401(k) plan?
Most 401(k) costs fall into a few buckets. Some are paid by the employer, some by participants, and some can be split depending on how you design the plan.
Recordkeeping / administration: The platform that tracks accounts, contributions, loans, distributions, and plan rules.
Third-Party Administrator (TPA) services: Compliance testing, plan document support, annual notices, and year-end reporting. (Some “bundled” plan providers include this; others price it separately.)
Investment expenses: The expense ratios inside mutual funds/ETFs and any managed account costs.
Advisor fees (optional but common): Help selecting investments, monitoring fees, fiduciary support, employee education, etc. See 401(k) financial advisors.
Custody / trust fees: Holding plan assets (often wrapped into recordkeeping pricing).
One-time setup fees: Plan establishment, conversion, and document drafting.
Audit costs (when applicable): Larger plans may require an annual CPA audit—see what a 401(k) audit is and when you need one and our directory of 401(k) auditors.
For context on required annual reporting, many plans also file a Form 5500. If that’s new to you, read what a Form 5500 is. Late or rejected filings can get expensive—see penalties for late or rejected Form 5500 audits.
Typical 401(k) cost ranges (with practical examples)
Below are common pricing ranges we see across major plan administrators and recordkeepers. Actual pricing depends on headcount, assets, payroll frequency, plan design (like Safe Harbor), and service level.
Important: Fees are typically quoted as (1) a flat annual base fee, (2) a per-participant fee, and/or (3) an asset-based fee (a percentage of plan assets). Many providers use a combination.
Example cost ranges by business size
These examples assume a typical 401(k) with payroll integration and standard compliance support. Investment expense ratios are not included because they vary by fund lineup, but we address them below.
Small business plans (10 employees, $500k in plan assets):
Employer-paid admin/recordkeeping: $1,500–$4,000 per year
Often quoted as: $1,000–$2,500 base + $30–$80 per participant
If asset-based pricing is used: 0.10%–0.40% of assets (about $500–$2,000 on $500k)
Growing company (50 employees, $3M in assets):
Employer-paid admin/recordkeeping: $4,000–$12,000 per year
Often quoted as: $2,000–$6,000 base + $35–$90 per participant
Asset-based pricing (if used): 0.05%–0.25% (about $1,500–$7,500 on $3M)
Mid-size (100 employees, $10M in assets):
Employer-paid admin/recordkeeping: $8,000–$25,000 per year
Often quoted as: $3,000–$10,000 base + $40–$100 per participant
Asset-based pricing (if used): 0.03%–0.15% (about $3,000–$15,000 on $10M)
Examples from common pricing models used by top administrators:
Flat + per-participant model: $2,000 base + $60 per participant. A 25-person plan would cost about $3,500/year (plus any advisor fee).
Asset-based model: 0.20% of assets. A $2M plan would cost about $4,000/year (plus any base fee if applicable).
Bundled “all-in” model: A single quoted fee that includes recordkeeping + TPA + basic support. These may look simple, but you still want to confirm what’s included (Safe Harbor? distributions? loans? amendments?).
If you want to sanity-check what you’re paying, benchmarking is the fastest way to spot outliers. See our guide to 401(k) fee benchmarking (and compare it against your current provider’s disclosures).
Don’t forget investment and advisor costs
Even if your employer-paid admin fees look reasonable, total plan cost can still be high if investment expenses or advisor fees are expensive.
Investment expense ratios: Often range from 0.03%–1.00%+ depending on whether you use index funds, active funds, or proprietary share classes.
Advisor fees: Commonly 0.25%–0.75% of assets for ongoing fiduciary support, or a flat annual fee in some cases. If you’re looking for help, start with 401(k) financial advisors.
Plan sponsors should review required fee disclosures and understand what participants are paying. The U.S. Department of Labor provides guidance on understanding retirement plan fees and disclosures on DOL.gov.
Other costs that can surprise employers
Some costs don’t show up until you add features or hit certain thresholds.
Safe Harbor plan design: Often increases TPA/compliance costs (more notices and required employer contributions), but it can reduce compliance headaches.
Plan amendments and restatements: Usually bundled, but not always.
Distribution and loan processing: May be included or charged per transaction.
ERISA bond: Many plans must have one. Learn more in What Is An ERISA Bond And How To Buy One? and compare options via ERISA bond providers. You can also review the requirement basics at DOL/EBSA.
Audit fees: If you cross the large-plan filing threshold, you may need an annual audit. Start with what is needed for a 401(k) audit and where to find it.
How to reduce 401(k) costs without cutting quality
Lower cost doesn’t have to mean lower service. A few practical levers can make a big difference:
Benchmark fees regularly: Use a consistent process and document it. (Start with our 401(k) fee benchmarking guide.)
Ask for institutional or lower-cost share classes: Especially as assets grow.
Clarify what’s included: Confirm whether testing, 5500 prep support, notices, distributions, and amendments are bundled.
Right-size the advisor relationship: Some plans need heavy fiduciary support; others need lighter-touch education and oversight.
Consider your small business options: Some providers are purpose-built for startups and smaller teams. Explore 401(k) plans for small businesses for common approaches and provider models.
Conclusion: what should you budget for a business 401(k)?
As a practical budgeting starting point, many small businesses land in the $1,500–$4,000/year range for employer-paid administration, while growing and mid-sized plans often fall between $4,000–$25,000/year depending on complexity and service level—plus investment expenses and any advisor fee.
If you want a clearer answer for your company, the next step is to benchmark your current fees (or get quotes for your headcount and assets) and confirm what’s included. If you’re evaluating providers or service partners, you can also explore retirement plan providers and, if an audit applies, browse 401(k) auditors.