The 401(k) marketplace is diverse and complex. Different providers offer multiple packages of services with significant variations in estimated costs. Considering the impact of fees on retirement savings is critical. As an employer sponsoring or considering a 401(k) plan, you are more familiar than most with the maze of fees and expenses surrounding retirement plan. But do you understand enough to meet your fiduciary responsibilities?

The Employee Retirement Income Security Act of 1974 (ERISA) requires retirement plan fiduciaries to act solely in the interests of, and for the exclusive benefit of plan participants and beneficiaries. As part of that obligation plan sponsors must consider cost, among other things, when selecting a retirement plan administrator and choosing investment options for the plan. Even fee differences that seem insignificant at first glance can have a huge impact over the long term. For example, over a 25-year period a participant paying 1% less in plan expenses will realize an additional 28% in retirement income.

This analysis assumes return on investment is compounded on a monthly basis. If analysis assumes return on investment is compounded on a yearly basis, then the additional return for Investor A is 26.2%.