I max out my IRA and HSA, so my next haven is my 401k which I also max out.

However, the fees for the funds it offer seems absolutely crazy. In my IRA and HSA I don't have an ETF with an expense ratio over .50% and most are under .10%

However, in my 401k many funds are ~1.4%.

One of the lowest expense ratio funds I could find was the "LargeCap S&P 500 Index Separate Account-R3" which has an expense ratio of 0.73%. I was also able to get a small and mid cap fund with a similar expense ratio.

I'm not going to be able to get my company to switch from Principal, but is there a way that maybe we could get access to some lower cost funds? For example I would like to update my portfolio to have more exposure to small cap value, but the "Delaware Small Cap Value R Fund (DVLRX)" they offer has an expense ratio of 1.4% and a 12b-1 fee of 0.5%! That seems more like getting robbed than investing.

  • Unfortunately my experience is that 401k plans have very high fees, and sometimes they do a good job of hiding even more fees. Don't use what fees you pay in your individual brokerage account as a good measure of what your company would get it they started a 401k plan.
    – JohnFx
    Sep 27, 2020 at 16:13

2 Answers 2


You can certainly ask raise your concerns to your HR representative. I'd be shocked if any reasonably large 401(k) provider didn't give companies the option to have fully self-directed accounts (i.e. accounts that would work just like your IRA where you can buy whatever stocks, ETFs, or mutual funds you want). And it is certainly possible for companies to get additional investment options without going all the way to a self-directed option.

The issue, though, is that providers will generally charge companies more for things like self-directed accounts. If you're a mutual fund company, you can get away with charging the company less to administer the 401(k) itself if you know that everyone's money is going to get directed into relatively high-cost funds that you own. If the company wants more lower cost options, they're likely going to have to shoulder more of the administrative costs of the 401(k) plan.

If your employer is hurting because of the pandemic, they may be very reluctant to increase the expense of offering a 401(k) plan to their employees. They may be able to get a few more of the relatively reasonable 0.75% fee options added for little or no cost. If your employer is making it through the pandemic in relatively good shape, particularly if most of their employees are relatively highly paid and making relatively large 401(k) contributions, improving the 401(k) plan may provide very good bang for the buck.


I work for a small company, we use a different 401(k) provider. A few years ago when I started the expense ratios were similar to those mentioned in the question.

A few employees asked the owner if there were other options. We were told that there were different packages available, and the ability to pick a package with lower expense ratios depended on the number of employees participating and the total value of all the employee accounts. We were told that if a few employees raised their percentage to be above the maximum match we could be in a better package by the end of the year. The company was told this, and how much additional was needed. A few months later we were told we had made the threshold, and the next month the expenses were more reasonable.

A long time ago I was interviewing for a position with a company. I asked about the 401(k) they told me honestly that the choices were bad, and were expensive. We spent more time in the interview discussing retirement plans, than we did discussing the job. I didn't get the job, but I did give them the name of our provider so they could talk to management. It was so bad, I might not have taken the job if it was offered, unless the pay was amazing. I heard later that they did change to a better plan.

Talk to management. They might care. Bad 401(k) programs can hurt their ability to hire, and the ability to keep employees. There are options. A 100% flexible plan might not be available. only one company I worked for even had that option, and they didn't start with that option.

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