A recent article from Paul Sippil, a forensic retirement consultant, offers a simple yet powerful idea: Employers should pay retirement plan fees instead of deducting them from employee accounts. Not only is this a win for your employees, but it’s a strategic move that benefits you as an employer, too.
If it seems like that is an extra cost you don’t want to own, think about it like this. When fees are pulled from participants’ accounts, everyone, including the business owner (who likely has one of the highest balances), feels the impact. Also, you don’t get any tax benefit. But when the business pays those fees directly, they become a deductible business expense, reducing your taxable income while protecting employees’ retirement savings. This is where everyone wins.
Here’s how it works behind the scenes:
- Fee payment method: Instead of automatic deductions from 401(k) accounts, arguably something many participants don’t even notice, you can do it through direct invoicing.
- Tax impact: Employer-paid fees lower your taxable income. That’s a real benefit that participants aren’t even eligible for under the current model.
- Employee engagement: Lower fees mean increased account growth and higher retention of talent.
As more plan sponsors start to insist on low-cost or flat-fee advisors with more transparency, the retirement industry will likely become more competitive.
Your financial well-being and that of your employees both improve—and not at the expense of the other.
- Better messaging: Employees appreciate knowing their plan costs less and can grow more.
- Stronger position: Your leadership can demonstrate proactive ownership by actively managing plan expenses in everyone’s best interest.
You can get started on this path faster than you may think. Review your current plan’s fee structure and see what’s being deducted from participant accounts versus being invoiced to you. Then ask your provider about shifting to employer-paid fees, or incentive-based pricing with clear transparency.
As Paul Sippil puts it, “It’s one of those rare decisions where everyone wins—just by changing and understanding who pays.” You can deliver a better benefit, reduce your own tax burden, and maintain your fiduciary duty all with one smart move.
Read the full article.
