How Often Should a 401(k) Plan Be Benchmarked?

How often should a 401(k) plan be benchmarked? At minimum, every 3 years, but many plan sponsors with serious fiduciary exposure conduct fee and vendor benchmarking annually or whenever a material change occurs in the plan. ERISA’s fee reasonableness standard requires ongoing documentation, and a benchmarking gap is one of the most common findings in a DOL audit.

Many plan sponsors assume benchmarking is a box they checked once when they set up the plan. That assumption carries real fiduciary risk. The Department of Labor does not care when you last ran an RFP. It cares whether you have a documented, repeatable process for demonstrating that the fees your participants pay are reasonable relative to the services provided.

The answer to how often depends on your plan size, how fees are structured, how long your current vendor relationship has been in place, and whether anything material has changed in the plan. This page walks through the standard benchmarking schedule, what triggers an off-cycle review, and what a plan sponsor benchmarking duty actually looks like in practice.

What ERISA Actually Requires on Benchmarking Frequency

ERISA does not specify a fixed benchmarking interval in statute. What it requires is that plan fiduciaries ensure fees paid to service providers are reasonable. That standard is ongoing, not one-time. The DOL’s 408(b)(2) regulation requires that covered service providers furnish fee disclosures to plan fiduciaries, and fiduciaries are expected to review and act on those disclosures.

In practice, the DOL has indicated through audit guidance and enforcement patterns that a 3-year benchmarking cycle is generally the minimum acceptable interval for many plans. Larger plans with more participants, higher fees, or more complex fund lineups often conduct reviews on a shorter cycle, sometimes annually.

The ERISA benchmarking requirement is not primarily about frequency. It is about documentation. You need to be able to demonstrate, if asked, that you reviewed fees, compared them against a reasonable market reference, concluded they were reasonable or took corrective action, and documented that process. A spreadsheet from five years ago does not satisfy that standard.

The Standard Benchmarking Schedule by Plan Size

The frequency that makes sense for your plan depends on several factors: total plan assets, participant count, fee complexity, and how fee revenues flow between your recordkeeper and the funds on your lineup. Below is the general framework many fiduciary advisors use when advising plan sponsors on a 401(k) fee benchmark schedule.

Frequency is one dimension. The other is scope. A 401(k) plan benchmarking review can range from a narrow fee comparison against a market database to a full RFP process where you solicit competing proposals from alternative recordkeepers. Both satisfy the fiduciary benchmarking standard, but the right scope depends on how long your current vendor relationship has been in place and whether you have any reason to believe fees have drifted out of market.

When markets get volatile, clarity matters.

Download our educational guide, How to Protect Your Wealth in Challenging Markets.

Download the guide

What 408(b)(2) Disclosures Tell You and What They Miss

Every covered service provider on your plan is required to furnish a 408b2 disclosure that details what they are paid and what services they provide. Many plan sponsors receive these disclosures, file them, and never look at them again. That is not compliance. That is paper storage.

The 408(b)(2) disclosure review is where the benchmarking process starts, not ends. The disclosure tells you what your recordkeeper charges for plan administration. What it often does not tell you clearly is the total all-in cost your participants bear, because revenue sharing flows back from fund companies to recordkeepers as compensation that does not appear on any invoice.

A participant in a plan with high revenue-sharing funds may be paying 0.85% annually in fund expenses, of which 0.35% flows back to the recordkeeper as indirect compensation. The plan sponsor may believe they are getting low administrative fees when in fact total plan costs are well above market. The 401(k) cost benchmarking process has to account for both layers: explicit administrative fees and implicit costs embedded in the fund lineup.

When you conduct a proper plan sponsor fee review, you compare the all-in cost per participant, the all-in cost as a percentage of assets, and the quality of the fund lineup against appropriate benchmarks. A plan with competitive administrative fees but an outdated fund lineup with high expense ratios may still be failing participants on total cost.

What Triggers an Off-Cycle Benchmarking Review

Even if your plan is on a 3-year cycle, certain events should prompt an immediate review regardless of where you are in that cycle. These are the triggers many fiduciary advisors flag as requiring attention before the scheduled 401(k) repricing frequency would otherwise call for a review.

• A significant increase in plan assets or participant count. Growth changes your negotiating position. A plan that was reasonably priced at $3 million may be paying above-market rates at $15 million because the recordkeeper’s fee schedule was never renegotiated.
• A change in the recordkeeper’s fee structure. If your recordkeeper has updated its pricing methodology or shifted how revenue sharing flows, your cost baseline has changed even if nothing on your end has moved.
• A material change in the fund lineup. Adding or removing funds, switching share classes, or converting to collective investment trusts are all changes that affect the total cost picture and warrant a review of whether the new lineup meets the fee reasonableness standard.
• A DOL audit notice or plan sponsor litigation in your industry. ERISA class action litigation against plan sponsors has increased substantially over the past decade, and early-stage audit inquiries often signal that the DOL is conducting industry-wide sweeps. If competitors in your industry are being scrutinized, your documentation should be current.
• A change in your plan advisor. If you have added an independent fiduciary advisor for the first time, they should conduct a baseline review as part of onboarding, regardless of your last benchmarking date.
• Five or more years without a formal RFP process. A fee comparison against a market database is a reasonable ongoing check. A full vendor RFP is a higher-order review that every plan should conduct periodically, and five years without one is the outside threshold many fiduciary advisors use.

What Does a Benchmarking Review Actually Look Like?

There is a range of approaches that fall under the heading of 401(k) fee comparison or plan benchmarking, and they are not all equivalent. Understanding the difference matters when you are deciding what your fiduciary process should include.

Many plan sponsors with strong fiduciary programs use a layered approach: a database fee comparison annually or biannually for ongoing documentation, an advisor-led all-in cost review every 2 to 3 years, and a full RFP process every 3 to 5 years to validate that the current vendor remains competitive against the actual market. None of these alone constitutes a complete fiduciary benchmarking process.

What Fee Reasonableness Actually Means Under ERISA

ERISA’s 401(k) fee reasonableness standard does not mean cheapest. It means that the fees paid to service providers are reasonable relative to the services they provide. A higher-cost recordkeeper that provides superior plan administration technology, participant education resources, and compliance support may satisfy the reasonableness standard even if a lower-cost alternative exists.

What the DOL looks for is evidence that you went through a meaningful process of evaluating what you are paying and what you are getting. The documentation of that process is what protects you in an audit, not the fee level itself. A plan paying slightly above-market fees with well-documented reasons for that decision is in a better position than a plan paying below-market fees with no documentation at all.

The 401(k) vendor review is not just a cost exercise. It is an evaluation of whether your current vendor is serving your participants well across administration quality, fund lineup quality, participant communication, and total cost. The fee is one variable in that equation, not the only one.

Are There Industry Standards or Statistics for 401(k) Plan Fee Benchmarking?

Yes. Several sources publish benchmarking data that plan sponsors and their advisors use to evaluate whether plan fees fall within a reasonable range for plans of comparable size, structure, and participant count.

The 401(k) Averages Book, published annually by 401(k) Averages Book LLC, is one of the most widely used fee study references in the industry. It breaks down total plan costs by plan size across both small and large defined contribution plans, covering administration fees, investment expenses, and all-in cost per participant. The data is organized by number of participants and total plan assets, which makes it practical for a plan sponsor benchmarking their own situation against plans of a similar size.

The NEPC 401(k) Fee Survey and reports from BrightScope provide additional data on plan fees by asset range and industry. BrightScope in particular rates individual plans on a relative basis, which can surface whether a specific plan is paying above-market fees relative to its peer group. The DOL’s Form 5500 data, which is publicly available, provides a broad industry baseline for plan fees, investment management costs, and service provider compensation across the entire defined contribution plan universe.

For most mid-market plans with $1 million to $50 million in plan assets, industry averages suggest total all-in plan costs in the range of 0.5% to 1.5% of assets annually, depending on plan design, fund selection, and administrative complexity. Plans using actively managed mutual funds and revenue-sharing arrangements tend to sit toward the top of that range. Plans that have converted to institutional share classes or collective investment trusts, and that have actively negotiated administration fees, often land significantly lower. The gap between the two outcomes is what benchmarking is designed to surface.

For small businesses and smaller plans under $1 million in assets, per-participant fees tend to be higher on a percentage basis because fixed administrative costs represent a larger share of total plan assets. That is normal and expected. The fiduciary responsibility is not to achieve the lowest possible cost but to demonstrate that costs are reasonable relative to the services plan participants receive and the complexity of the plan’s design.

Can Benchmarking 401(k) Fees Affect Employee Retention?

Indirectly, yes. Retirement benefits have become a meaningful factor in how employees evaluate total compensation, particularly among higher earners who have the most to gain or lose from plan design decisions. A plan with high investment expenses and a weak fund lineup costs plan participants real money over time, and employees who understand this will notice.

The connection between benchmarking and retention runs through plan quality. When a plan sponsor conducts regular reviews and takes corrective action, the result tends to be lower investment fees, better investment options, and a fund lineup that reflects current best practices rather than a menu assembled a decade ago and never revisited. Those improvements directly benefit plan participants in the form of higher net returns on their retirement savings.

For plan sponsors competing for experienced professionals, particularly executives, engineers, physicians, and other high-income employees who place significant weight on their defined contribution plan as a wealth-building tool, plan quality can be a differentiator in recruiting and retention. A plan that has been benchmarked and optimized signals that leadership takes the retirement benefit seriously. A plan with excessive fees and an outdated fund lineup signals the opposite.

The benchmarking process also creates an opportunity to evaluate whether the plan’s design itself is serving employee benefits well: whether automatic enrollment is structured appropriately, whether the default investment options are suitable, whether participation rates are high enough to make the plan meaningful. These are plan design questions that benchmarking often surfaces as part of a broader plan sponsor fee review and vendor evaluation.

What Steps Should You Take Before Benchmarking Your Company’s 401(k) Plan?

Effective benchmarking starts with having your own plan data organized and complete. Before you can evaluate whether your plan fees are reasonable, you need to understand what you are currently paying across all categories. These are the steps many fiduciary advisors walk plan sponsors through before the benchmarking process begins.

Gather your 408(b)(2) disclosures from all covered service providers. This includes your recordkeeper, any investment manager, and any third-party administrator. These disclosures are required to be provided to you, and they are the starting point for understanding direct compensation. If you cannot locate them, contact each service provider and request a current copy.

Pull your plan’s most recent Form 5500. The Form 5500 is the annual report filed with the DOL and contains schedule H or I (depending on plan size), which breaks out plan assets, contributions, distributions, and service provider fees. It is a public document and can be retrieved from the DOL’s EFAST2 system. Review it against your service provider disclosures to confirm consistency.

List every fund in your plan lineup with its current expense ratio. Fund expense ratios are the most significant component of total plan fees for many plans, particularly those using actively managed mutual funds or retail share classes. You need the ticker symbol and expense ratio for each fund currently available to plan participants. This data is available from each fund company’s prospectus or from FINRA’s Fund Analyzer.

Document the services your recordkeeper actually provides. Before you can evaluate whether fees are reasonable, you need to understand what services are included. This includes participant recordkeeping, compliance support, plan documents preparation, participant education, and any digital tools provided to employees. A recordkeeper charging 0.20% of assets for a full service suite is different from one charging 0.15% for a stripped-down platform.

Assemble your investment policy statement. If your plan has one, the investment policy statement governs how fund selection decisions are made and documented. The benchmarking process should reference it. If your plan does not have a written investment policy statement, that gap should be addressed as part of the broader review, because it is a foundational fiduciary document.

Engage an independent advisor with plan sponsor experience. Unless your internal team has specific expertise in plan fee benchmarking and ERISA fiduciary responsibility, the benchmarking process is most effective when conducted with or by an independent advisor who can bring market context, fee study databases, and fiduciary documentation skills that many plan sponsors do not maintain in-house. The advisor’s independence is also relevant: an advisor compensated through the plan’s investment options has a conflict of interest that may distort the benchmarking conclusions.

How Plan Sponsor Benchmarking Duty Connects to the Broader Fiduciary Picture

Benchmarking is one element of the broader ERISA fiduciary framework, which covers plan design, investment selection, fee monitoring, and participant outcomes. A plan sponsor who benchmarks fees rigorously but neglects the investment policy statement or fails to document fund selection decisions is still carrying fiduciary exposure.

The Workplace Retirement Plan Optimization framework covers all of these elements as a connected system. HCM’s approach to workplace retirement plan optimization treats benchmarking as a recurring process tied to a documented investment committee calendar, not a one-time event. That calendar is what transforms a good-faith effort into a defensible fiduciary record.

For plan sponsors working through the 401(k) and workplace planning framework more broadly, the benchmarking question is often the most urgent one because it has the most direct connection to DOL audit exposure and participant litigation risk.

The investment side of the equation connects to broader portfolio principles. The investment portfolio construction process used for individual clients shares the same core discipline: evaluate what you own against what is available, document your reasoning, and revisit that evaluation on a defined schedule. For plan sponsors, that discipline applies to the fund lineup rather than individual securities, but the logic is the same.

Tax efficiency is also a dimension that often surfaces during benchmarking reviews. Plans with access to institutional share classes or collective investment trusts often carry meaningfully lower expense ratios than plans using retail fund classes, and the difference compounds over time. A tax-efficient investing framework informs fund selection in plan lineups as part of the broader review.

The philosophy underlying the approach to fiduciary oversight for plan sponsors is the same one that governs HCM’s work with individual clients: Preserve. Strengthen. Grow.™ That sequence applies to retirement plan assets just as it does to personal wealth. Preserving the value of what participants have accumulated means keeping costs reasonable. Strengthening the plan means building a fund lineup and administrative structure that serves participants well. Growth follows from both.