The Department of Labor offers flexibility in determining and paying plan fees, placing a significant fiduciary responsibility on Retirement Plan Committees to evaluate and document all administrative expenses. As fees can greatly influence retirement outcomes, understanding the structure of these costs is crucial for ensuring transparency and assessing their reasonableness.

The Impact of Recordkeeping Fees:

Recordkeeping fees and other costs play a pivotal role in managing a 401(k) plan. These expenses impact the overall effectiveness of the plan and the financial well-being of its participants. By scrutinizing these costs, Committees can enhance the plan’s efficiency and fairness.

Understanding Revenue Sharing:

Many retirement plans incorporate funds that engage in revenue sharing—redirecting a portion of the fund’s expense ratio back to the plan. This can cover some or all administrative expenses, a practice that appears equitable at first glance. However, complexities arise when comparing fund types within the plan. For instance, actively managed funds typically have higher expense ratios and often return a portion of these fees to the plan. In contrast, passively managed index funds usually do not offer revenue sharing. This creates a disparity: participants in actively managed funds may end up bearing a disproportionate amount of the plan’s administrative costs, despite all participants benefiting equally from administrative services.

Promoting Fair Fee Distribution:

To address these disparities and promote fairness, Retirement Plan Committees can consider several strategies:

Direct Revenue Sharing to Participants: Many recordkeepers can periodically redistribute revenue sharing amounts directly back to participants. This method allows for a more equitable allocation of plan-related expenses, which can be structured either as a basis point fee or a per participant fee.

Adopt Clean Share Classes: Opt for investment options that utilize “clean” share classes, which are typically devoid of revenue sharing features. Known as “institutional” or various “R” share classes depending on the fund company, these options allow for direct charging of plan-related expenses, ensuring a fair distribution of fees among all participants.


As fiduciaries, Retirement Plan Committees must diligently assess and manage 401(k) plan fees to safeguard the interests of all participants. Implementing equitable fee structures not only complies with regulatory standards but also fosters a transparent and fair retirement plan environment.