Empower 401(k) High Fees: What Plan Sponsors Can Do

Why Empower 401(k) Fees Deserve a Closer Look

Empower is one of the largest recordkeepers in the country, serving thousands of employer-sponsored plans across every industry. Scale brings real advantages, but scale also masks variation. Two Empower plans of similar size can carry meaningfully different all-in costs depending on the share class of the funds in the lineup, the advisor of record, and the revenue-sharing arrangement embedded in the plan documents. When a plan committee starts to suspect Empower retirement high fees are eroding participant balances, the answer almost always lives in those three places.

The fees plan sponsors most often miss are the ones that do not appear on a single line of an invoice. Fund expense ratios are paid by participants out of returns. Revenue-sharing payments flow between fund families and the recordkeeper without ever crossing the plan sponsor’s desk. Wrap fees, advisor fees, and asset-based recordkeeping charges layer on top of the explicit administrative fee. Add them together and the picture changes. The plans where Empower 401(k) high fees become a real fiduciary issue tend to be the ones where no one has done that addition in years.

For a high-balance participant, a difference of 50 basis points per year in plan costs compounds into a meaningful figure over a 25-year career. For a plan sponsor, that same gap is a fiduciary question. ERISA requires that plan fees be reasonable. Reasonableness is established through documentation, benchmarking, and a process that demonstrates the sponsor reviewed the costs and concluded the costs were appropriate for the services delivered.

The broader framework on workplace retirement plan optimization covers the full set of plan-level levers a sponsor can pull. This page focuses on what to look at specifically when an Empower plan starts to feel expensive and an Empower 401(k) cost review is in order.

What Plan Sponsors Are Actually Paying for on Empower

Empower 401(k) expense ratios and plan-level costs typically fall into four categories. Each one needs to be looked at separately before the total can be evaluated.

1. Recordkeeping and administrative fees. The cost of running the plan: enrollment, statements, compliance testing, Form 5500 preparation, participant call center, and the technology platform itself. Charged as a flat per-participant fee, an asset-based percentage, or a combination of both.
2. Investment fees. The expense ratios on the funds inside the lineup. These are paid directly by participants out of returns and never appear on the plan sponsor’s invoice. The choice of share class matters here. Retail share classes can run 50 to 100 basis points higher than institutional share classes for the same fund.
3. Advisor fees. If a broker or advisor is named as the plan’s advisor of record, that advisor is paid either through revenue-sharing arrangements built into the funds or through a separate advisor fee disclosed on the 408(b)(2). Many plans pay both without realizing it.
4. Revenue sharing and 12b-1 fees. Payments from fund families to the recordkeeper or advisor in exchange for shelf space. These reduce the explicit administrative fee but increase the participant’s all-in cost. Whether this is acceptable depends on disclosure and on whether the offset is fair.

Empower discloses all four categories in the 408(b)(2) fee disclosure delivered to plan sponsors annually. The question is whether the plan committee has actually read it, mapped each fee to a service, and benchmarked the totals against what comparable plans pay.

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The Fiduciary Risk Plan Sponsors Do Not Always See

Plan fees are not just an economic question. They are a fiduciary one. The Department of Labor takes the position that fees must be reasonable, that the sponsor must follow a prudent process to determine reasonableness, and that the process must be documented. When a participant lawsuit alleges Empower plan fees are too high, the case rarely turns on whether the fees were the lowest available. It turns on whether the sponsor can show a documented process.

The risk shows up most often in three places. First, Empower plan fee benchmarking that has not been refreshed in three or more years. Plan costs have come down materially across the industry, and a plan that looked reasonable in 2020 may not look reasonable today. Second, fund lineups dominated by retail share classes when institutional share classes are available at a lower cost for the same fund. Third, the absence of a written investment policy statement that spells out how the committee evaluates fees, performance, and the lineup itself.

None of these are unique to Empower. The pattern shows up across every major recordkeeper. What is specific to Empower is that the platform supports a full range of share classes and a self-directed brokerage account capability, which means the tools to address high fees and the option to expand access for high-balance participants are typically available within the existing platform. The fix often does not require changing recordkeepers. It requires changing what is happening inside the plan.

How Does an Empower 401(k) Plan Fee Benchmarking Review Work?

Empower plan fee benchmarking compares the plan’s all-in cost against similarly sized plans, broken out by recordkeeping, investment, and advisor fees. The output is a written Empower 401(k) fee analysis report showing where the plan sits relative to peers and which costs may warrant negotiation or share class changes.

What Plan Sponsors Can Actually Do About It

Once the fee picture is clear, the response splits into a small number of practical moves. None of them require leaving Empower. All of them require a fiduciary willing to read the disclosures, ask questions, and document the answers.

The first move is a formal fee benchmarking exercise. This is not the marketing summary the recordkeeper provides. It is an independent comparison against plans of similar size and participant count, broken down by component. The output is a written report the plan committee can put in the file.

The second move is a fund lineup audit. Look at the share class of every fund in the menu. If retail share classes are present and institutional share classes are available for the same fund, the institutional share classes are almost always the better choice for participants. The cost reduction goes directly to the participant.

The third move is a review of the advisor of record. Many Empower plans were sold by a broker who has not engaged with the plan committee in years. The advisor is still being paid through revenue sharing or a separate fee. If the service is not being delivered, the fiduciary question is whether the cost is reasonable. Replacing an inactive Empower retirement broker of record with an independent fiduciary advisor of record is one of the most direct ways to address the fee question and the fiduciary question simultaneously.

The fourth move is to look at what is available for high-balance participants. Empower supports self-directed brokerage account access through Schwab as a platform capability. Whether that capability is actually offered to participants in any specific plan is a plan sponsor decision, governed by the plan document and the committee’s fiduciary review process. For plans that elect to offer it, qualifying high-balance participants can access individually managed portfolios through Schwab while their assets remain inside the plan. The framework on the self-directed brokerage account 401k covers how this works in practice. It is not a fix for the plan-level fee question. It is a downstream benefit for the participants whose balances make a difference.

The Role of an Independent Advisor of Record

The advisor of record on an Empower plan is a fiduciary. That advisor has a duty to the plan and its participants, not to the recordkeeper, not to a fund family, and not to any third party paying revenue sharing into the arrangement. When the advisor of record is independent, fee-transparent, and actively engaged with the plan committee, the fiduciary process gets stronger and the fee picture usually gets clearer.

Holland Capital Management serves as the advisor of record on employer-sponsored 401(k) plans across major recordkeepers, including Empower, with a fiduciary, fee-only approach. The work includes annual fee benchmarking, fund lineup review, investment policy statement maintenance, and committee meeting support. For plans that elect to offer self-directed brokerage account access, the work also includes individually managed accounts through Schwab for qualifying high-balance participants who want professional management without rolling assets out of the plan. The investment philosophy that guides the advisory relationship is Preserve. Strengthen. Grow.™

The plan stays at Empower. The plan sponsor stays in control of the plan committee. The advisor of record changes, the fee benchmarking gets done, the lineup gets reviewed, and the documentation supports the fiduciary process. That is what many Empower plan sponsors are actually looking for when they begin an Empower 401(k) fiduciary review.

For the broader picture of how plan-level decisions interact with rollover decisions for individual participants, the 401k rollover strategy guide is a useful companion. For tax considerations that affect both plan-level fund choices and individual portfolio construction, the tax-efficient investing framework covers the territory. And for participants whose balances justify professional management at the security level, the investment portfolio construction guide explains the approach.