Understanding 401(k) Plan Fees and Mutual Fund Expense Ratios

Every 401(k) plan comes with some costs—but the good news is, most of them are easy to understand once you know where to look. Whether you're a new participant or revisiting your investment strategy, it's important to understand how plan fees and fund expenses can impact your retirement savings.

1. What Are 401(k) Plan Fees?

401(k) plan fees are the costs associated with administering the plan, keeping your account running, and managing investments. These fees can come from a few different sources:

Types of Plan Fees:

Fee Type	What It Covers
Administrative Fees	Recordkeeping, customer service, compliance, and statements
Investment Fees	Costs of managing the mutual funds or other investments in the plan
Individual Service Fees	Optional services like loan processing or distribution requests

Some of these fees are charged directly to your account (you’ll see them on your quarterly statement), while others are embedded in the fund returns (indirect fees).

2. What Is a Mutual Fund Expense Ratio?

A mutual fund expense ratio is the annual cost of owning a mutual fund, expressed as a percentage of your investment in that fund.

What It Includes:

Portfolio management fees
Marketing or distribution fees (also called 12b-1 fees) - NestEggs typically avoids offering funds that charge 12b-1 fees
Administrative and operational costs

Example: If you invest $10,000 in a fund with a 0.50% expense ratio, you’ll pay approximately $50 per year in fees, automatically deducted from the fund’s returns.

3. Why Do These Fees Matter?

Even small fees can have a big impact over time due to compounding. The lower your fees, the more money stays in your account to grow.

Here’s a simple comparison:

Fee Level	Balance After 30 Years (Assuming 7% return)
0.25%	~$711,000
1.00%	~$574,000

A 0.75% difference in fees can cost you over $130,000 over 30 years.

4. How to Find Your Plan’s Fees and Expense Ratios

NestEggs is required to disclose fees clearly. You can find them in:

Quarterly account statements: Look for “plan administrative expenses” or “individual fees”
Annual 404a-5 fee disclosure notice: Lists each investment option and its expense ratio
Fund fact sheets: Provided on your NestEggs online account — under the “Investment Menu” menu option

If you're unsure, please call NestEggs for help finding this information.

5. Are Higher Fees Always Bad?

Not necessarily. Some actively managed funds may charge more in exchange for professional stock selection, and they may outperform in certain market conditions.

But:

Lower-cost index funds often (not always) perform just as well—or better—over time
Always compare fees with fund performance and investment objectives

Summary: What to Watch For

What to Look At	Why It Matters
Administrative Fees	Know what you’re paying for plan services
Fund Expense Ratios	Impacts your investment return
Individual Fees	Avoid unnecessary charges (e.g., loans or paper statements)
Disclosure Notices	Use them to make informed fund choices

Need Help?

NestEggs can help walk you through your options if you're unsure what you're paying or how to choose lower-cost funds.