401(k) transaction fee

What is a 401(k) transaction fee? 

A 401(k) transaction fee is charged when an employee or employer performs a specific action within their retirement plan or account. Unlike administration and investment fees, transaction fees are generally event-based and triggered when a specific request is made. 

What are examples of 401(k) transaction fees?

Employee-level transactions: Involve individual money movement and account maintenance.

• Loans origination/maintenance: Borrowing from one's own balance.

• Hardship withdrawal: Emergency access to funds.

• Qualified domestic relations order: Dividing assets due to divorce.

• Required minimum distribution: Mandatory withdrawals for participants nearing retirement.

• Rollover: Moving money from a previous employer's plan.

• Refunds (402g/ADP): Returning excess contributions to a participant.

• Employment termination distributions: Moving money out after leaving a job.

Employer-level compliance & regulatory filings: Revolve around legal operations and help ensure the plan stays qualified under IRS and DOL rules.

• ADP/ACP failures: Results of non-discrimination testing.

• Compliance testing: Checking for plan fairness.

• 8955-SSA: Reporting on separated participants with deferred vested benefits.

• Form 5500 filing/extension: The primary annual report for the plan.

• Restatements/plan amendments: Legally required updates to plan documents.

• Fidelity bond: Required insurance to protect the plan against fraud.

Employer-level plan governance & asset management: Encompass broad changes to the plan's structure or investment options.

• Fund changes: Updating the menu of investment options.

• Custom funds: Creating specialized investment vehicles for the plan.

• Certified trust statement: Official verification of plan assets.

• Profit sharing calculations: Determining how employer contributions are allocated.

Employer-level plan lifecycle & transition: Cover structural events involving the entire plan or provider.

• Deconversions: Moving the plan to a new recordkeeper/provider.

• Terminations: Closing the plan entirely.

Why transaction fees matter

Transaction fees may be levied against employees for accessing their own funds, often during times of hardship. For employees, transaction fees can range from $20 per rollover to $625 to cover the costs of a QDRO. While a $20 fee may not seem high in isolation, several of them over the life of an account can create a drag on savings. Every dollar paid in fees is a dollar that isn’t benefiting from compound growth and interest.

On the employer side, transaction fees are often charged for routine compliance or administrative actions. These actions can range from $50 for an excess fund lineup charge to $1,250 for a plan amendment restatement and $1,375 for a service termination.

It’s important to understand the true cost of 401(k) administration fees and expenses. At Human Interest, we believe that employers and employees shouldn’t be charged to access their funds or for routine compliance filings. That’s why our 401(k) plans come with zero transaction fees.*

*For non-rollover distributions, shipping and handling fees may apply to requests for check issuance and delivery.