What Is an Ongoing Fee Benchmarking Review for a 401(k) Plan?
Setting up a 401(k) plan is only the beginning — the costs of running it are expected to be checked again and again over the life of the plan, not locked in once and forgotten.
The short answer
A fee benchmarking review is the periodic process a plan sponsor uses to compare its 401(k) plan’s costs, recordkeeping, administration, and investment management, against what similar plans of comparable size charge. The goal is to confirm the plan’s fees remain reasonable over time, and the review often leads to renegotiating with a provider or replacing higher-cost funds with lower-cost alternatives.
Why this isn’t a one-time task
A plan’s costs that looked competitive when the plan was set up can drift out of line over time as the market for plan services changes and as provider pricing shifts. Because plan sponsors carry a fiduciary duty to act in participants’ best interest, that responsibility doesn’t end at plan setup — it extends to periodically confirming the ongoing costs are still reasonable, which is why benchmarking reviews are expected to happen on a recurring basis rather than once.
What gets compared
A typical benchmarking review looks at several layers of cost side by side: the overall recordkeeping and administrative charges, investment management fees embedded in each fund’s expense ratio, and how those numbers compare to plans of similar size and participant count. Reviewers often use data from independent benchmarking services or requests for proposals from competing providers to get a realistic sense of market pricing rather than relying on the current provider’s own claims about competitiveness.
How results get used
When a review turns up costs that are out of line with comparable plans, the sponsor generally has a few options: renegotiating pricing with the existing provider, switching to a different provider, or replacing specific higher-cost funds in the lineup with lower-cost alternatives, such as swapping an actively managed fund for a comparable index fund. None of these changes happen automatically — they depend on the sponsor actually acting on what the review finds.
What it means for participants
Participants don’t typically see the benchmarking review itself, but its effects can show up indirectly as changes to the fund lineup, a lower recordkeeping charge reflected in the fee disclosure, or a shift in who covers administrative costs. A plan that conducts regular reviews and acts on the findings tends to keep costs more competitive over time than one that leaves the original setup untouched for years.
The takeaway
An ongoing fee benchmarking review is essentially routine maintenance for a 401(k) plan’s cost structure, driven by the expectation that fiduciaries keep checking rather than assuming initial pricing stays fair indefinitely. For a participant, it’s worth knowing that this process exists in the background, even if the plan documents don’t always highlight when or how recently it was last done.