The retirement plan industry loves to talk about value, but it keeps pricing itself as if value doesn’t matter. Nowhere is this more obvious than in the constant race to the bottom on provider fees. TPAs, recordkeepers, and bundled providers keep cutting prices to win business, then act surprised when margins disappear and risk increases.
The problem isn’t competition. Competition is healthy. The problem is that many providers are selling compliance work as a commodity, even though it isn’t one. Administering a 401(k) plan isn’t the same as processing payroll or hosting data. It requires judgment, interpretation, and experience—especially in an era of SECURE 2.0, complex correction rules, and heightened litigation risk.
Low fees create a dangerous incentive structure. Providers price as if they are offering data entry, but sponsors expect legal-adjacent guidance, operational problem-solving, and real-time answers. Something eventually gives. Either the provider cuts corners, overloads staff, or quietly shifts risk back to the plan sponsor without making that shift explicit.
There’s also a long-term cost to the industry. When fees collapse, experienced professionals leave. Training suffers. Institutional knowledge disappears. What’s left is automation without judgment—and automation doesn’t testify well in court.
Ironically, racing to the bottom doesn’t even protect providers from liability. Plaintiffs’ attorneys don’t discount claims because the fee was low. Courts don’t either. If anything, low fees make it harder to explain why robust processes weren’t in place.
Providers need to stop competing on price alone and start competing on clarity, competence, and accountability. The plans that fail—and the lawsuits that follow—are rarely caused by overpricing. They’re caused by underestimating what the work is really worth.
