Who is really paying your plan's fees

Ask an owner what the company 401(k) costs and the answer is often "nothing." No invoice arrives. Nothing shows up in accounts payable. The plan appears to run itself.

It does not. It is paid for out of plan assets.

Direct and indirect compensation

Direct compensation is what the plan pays a provider by invoice. Indirect compensation is what the provider collects from inside the investments — revenue sharing, sub-transfer-agency fees, 12b-1 fees. The second kind never appears as a bill, because it is deducted from participant balances before anyone sees a statement.

Why the owner absorbs the most

Asset-based fees scale with the balance they are charged against. In a plan with ten to fifty employees, the owner and a few senior people typically hold most of the assets, so most of the asset-based cost lands on them.

What to ask for

Request the 408(b)(2) disclosure from the plan's service providers. It is required to state who provides services, how they are paid, and whether they act as a fiduciary. Read that document beside the fund lineup, and the picture stops being abstract.

The cost was always being paid. The only variable is whether you knew the number.