Most companies want to offer their employees a way to save for retirement, but the dizzying array of choices can be so daunting that some push it to the back burner, or just settle for a plan without knowing the bottom-line costs.  Those costs can be take the form of cold hard cash, as well as opportunity costs from inferior fund choices.

If your annual plan expenses are 0.50% higher than they could be, you owe it to your employees to review those costs to see if they're reasonable relative to the services they receive.  Why?  Because a mere 0.50% in additional annual expenses can add up to millions of dollars, due to the nature of compounding.

For example, let's say your 401k plan has $5,000,000 in assets and you have 100 participants in the plan.  For simplicity sake, we'll assume that each participant has a balance of $50,000 and will contribute $2,000 each year, equaling a total annual contribution of $200,000.  Plan A is a lean plan that offers far better funds than Plan B, and at a lower cost.  Overall, Plan A costs 0.50% less than Plan B.  Assuming that Plan A can provide an annual return of 8.0% then Plan B will return 7.50%, or 0.50% less.  This is how the assets of both plans grow over 30 years: