Fast 401(k) Growth: Business Fee Hack Revealed

Running a small business is a constant juggle, right? You're wearing all the hats, from sales to HR, and always looking for smart ways to stretch every dollar. When it comes to your 401(k), you probably think about matching contributions and making sure your team is signed up. But there's a sneaky little thing called administration fees that can eat away at everyone's retirement savings, including your own. Here's a thought: what if your business covered those fees directly? It might sound small, but it could make a real difference in your employees' long-term security and even give your business a nice little tax break.

Understanding 401(k) Administration Fees 

Every 401(k) plan comes with administrative costs covering essential services like recordkeeping, compliance, and investment management. These fees are typically handled in one of three ways: 

• Direct Fees – Deducted directly from participant accounts. 

• Indirect Fees – Embedded within investment fund expense ratios (often less transparent). 

• Employer-Paid Fees – Paid directly by the business. 

The key takeaway? Direct and indirect fees reduce participant retirement savings, while employer-paid fees help preserve them.

How Fees Impact Retirement Savings 

Even seemingly small fees can take a big bite out of retirement funds over time. Consider a 30-year-old employee with a $25,000 balance in their 401(k). Here’s how different fee structures impact their savings by age 65:  

Balance at Age 30	Annual Return	Annual Fee	Balance at Age 65	Loss in Retirement
$25,000	7% per year	No fee	$289,640.62	-
$25,000	7% per year	1.0%	$204,119.02	($85,521.60)
$25,000	7% per year	2.0%	$143,847.83	($145,792.79)

As you can see, even a 1% annual fee could cost an employee over $85,000 in lost retirement savings. A 2% fee? Nearly $146,000 gone. 

By covering these costs as the employer, you allow your own savings—and your employees’ savings—to compound without unnecessary deductions. 

Why Paying Fees from Your Business Account Is a Smart Move

Here’s why this strategy benefits both your business and your employees:

Maximize Your Own 401(k) Savings 

As a business owner, your personal 401(k) balance may hold a significant portion of the plan’s assets. Paying fees from your business helps protect your own retirement funds from unnecessary depletion. 

Reduce Your Tax Burden 

401(k) administrative fees paid from your business are tax-deductible, lowering your taxable income. Plus, under the SECURE 2.0 Act, small businesses may qualify for additional tax credits related to retirement plan expenses in the first few years of the plan. 

Improve Employee Retirement Outcomes

When employees’ savings aren’t reduced by administrative costs, their wealth grows faster—leading to greater financial security and job satisfaction. 

Increase Transparency and Reduce Hidden Fees

Paying fees directly from your business account ensures you have full visibility into costs, helping you avoid harder to determine expenses like revenue sharing. 

Reduce Fiduciary Liability

Employers have a legal responsibility to keep 401(k) fees reasonable. Covering costs yourself can help minimize fiduciary risk associated with excessive participant-borne fees. 

A Win-Win for Your Business and Employees 

Paying 401(k) administration fees from your business account isn’t just a smart financial decision—it’s an investment in the long-term financial health of your workforce. This simple yet powerful change can make your retirement plan more attractive, reduce tax liabilities, and support better retirement outcomes for everyone. 

Take Action Today for 401(k) Growth

Those 401(k) fees? They're like little termites, slowly nibbling away at your retirement savings, and your employees' too. It's easy to overlook them, but over time, they really add up. Why let something so preventable chip away at your financial future? Take a good, hard look at your 401(k) fee structure. You might be surprised at what you find. And hey, a simple shift could make a huge difference down the road. Want to see how? Give RPCSI a call – we're happy to help you figure it out.