Is Your Company's 401(k) Exposing You to Fiduciary Liability?
If your business sponsors a 401(k) plan, you may already know you're a fiduciary under ERISA. What surprises a lot of owners is how personal that responsibility is — and how much of it comes down to something as unglamorous as plan fees.
What Being a Fiduciary Actually Means
As a plan sponsor, you have a legal duty to act solely in the interest of plan participants, which includes evaluating whether the fees your employees are paying — administrative costs, investment expenses, advisor compensation — are reasonable for the services being provided. This obligation doesn't scale down for smaller plans, per the Department of Labor's own Meeting Your Fiduciary Responsibilities guidance. A company with a handful of employees carries essentially the same fiduciary exposure as a much larger one.
A 2021 U.S. Government Accountability Office report found that roughly 40% of 401(k) participants don't fully understand the fee information their plan is required to disclose, and about 41% don't realize they're paying fees at all (GAO-21-357, 2021). That's a participant-side statistic, but it points to a sponsor-side question worth asking directly: when was the last time your plan's fees were actually benchmarked against the market, rather than assumed to be reasonable because nothing has changed?
Questions Worth Walking Through
When did you last review your plan's fee disclosures? ERISA requires covered service providers to disclose their fees in writing, but a disclosure sitting in a file isn't the same as an evaluation. Confirming your plan's fees are documented and reviewed is worth doing with your plan's advisor or a third party.
Do you know what you're paying for, specifically? Recordkeeping, investment management, and advisory fees are often bundled together in ways that make true costs hard to see without asking directly.
Has your plan been benchmarked recently? A fee that looked reasonable five years ago may not be reasonable today, given how much competition and fee compression have reshaped the small-plan market. This is worth confirming rather than assuming.
Who else is reviewing this with you? Fiduciary duty doesn't require you to be an expert alone — it requires a prudent process, which usually means involving your CPA, an ERISA attorney, or a financial professional familiar with plan-level fee review.
This Is a Business Risk Question, Not Just an HR One
It's easy to let a 401(k) plan run quietly in the background once it's set up. But as the sponsor, unreviewed fees aren't just a cost to your employees — they're a personal fiduciary exposure to you. A periodic, documented fee review is one of the more straightforward ways to manage that risk.
On the participant side of this same question, our post on how much you're really paying for your 401(k) is a useful companion read, and why trust matters when a financial advisor works in a fiduciary capacity goes into what that standard means in practice.
If it's been a while since your company's plan fees were reviewed, the 401(k) Fee Review page outlines what a complimentary review looks like and what it typically uncovers.