Retirement Plan Costs
Paychex 401(k) Fees Explained: What Small Businesses Really Pay in 2026
Paychex 401k plans carry multiple fee layers - some visible, some hidden in fund expense ratios. Here's a complete breakdown of every cost and what to watch for before you sign.
1.15%/yr
Total Avg Fee
Of plan assets annually
$330/yr
Admin Fee
Per participant average
$1,500
Transfer Fee
If you switch providers
0.5-1.5%
Discontinuance
Of assets within 5yr term
The Five Fee Layers in a Paychex 401k Plan
| Fee Type | Amount | Visibility | Notes |
|---|---|---|---|
| Administration Fee | ~$330/participant/yr | Visible | Covers recordkeeping, compliance, reporting |
| Revenue Sharing | ~30% of admin fees | Hidden | Paid by fund companies via expense ratios |
| Fund Expense Ratios | 0.50-1.50%/yr | Disclosed | Each fund's built-in management fee |
| Plan Transfer Fee | $1,500 flat | Disclosed | One-time fee if you switch providers |
| Discontinuance Fee | 0.5-1.5% of assets | Contractual | Only within 5-year term |
| Loan Origination Fee | $75-$200 | Disclosed | Per loan, charged to participant |
Real Cost Example: 10-Person Plan
Scenario: 10 employees, $25,000 average account balance ($250,000 total plan assets)
- Administration fees: 10 participants x $330 = $3,300/yr
- Fund expense ratios (1% avg): 1% x $250,000 = $2,500/yr
- Total annual 401k cost: ~$5,800/yr
- As % of assets: 2.32% of plan assets
At Employee Fiduciary: $1,500 flat + 0.08% assets = $1,700/yr. Annual savings: $4,100.
The 5-Year Contract Trap
Paychex 401k plans include a 5-year term commitment with discontinuance fees if you leave early. This is a standard industry practice but catches many employers off guard - especially those who started a plan when small and want to switch to a lower-fee provider as plan assets grew.
| Plan Assets | Exit Year 1 | Exit Year 3 | Exit Year 5+ |
|---|---|---|---|
| $100k | $2,000 | $1,000-$2,500 | $1,500 transfer only |
| $250k | $5,000 | $2,500-$6,250 | $1,500 transfer only |
| $500k | $10,000 | $5,000-$12,500 | $1,500 transfer only |
| $1M | $20,000 | $10,000-$25,000 | $1,500 transfer only |
401k Alternatives to Paychex
| Provider | Annual Cost | Per-Participant | Revenue Sharing | Best For |
|---|---|---|---|---|
| Paychex 401k | 1.15% assets | $330/yr | Yes | All-in-one with payroll |
| Employee Fiduciary | 0.08% + $1,500 flat | ~$60/yr | No | Cost-conscious, $200k+ assets |
| Guideline | 0.50% assets | Included | No | Tech-forward, auto-enroll |
| Betterment for Business | 0.25% assets | Included | No | Modern investment options |
Frequently Asked Questions
How much does Paychex charge for 401k?
Paychex 401k plans average approximately 1.15% of total plan assets annually in total fees, including about $330 per participant per year in direct administration fees. There are also indirect fees through fund expense ratios where Paychex receives revenue sharing. A 10-person plan with $250,000 total assets typically costs $5,000-$6,000/year in total 401k costs.
What is the Paychex 401k termination fee?
Paychex charges a $1,500 plan transfer fee if you move your 401k to a new provider. Additionally, if you exit within a 5-year contract term, discontinuance fees of 0.50% to 1.50% of total plan assets apply. For a plan with $500,000 in assets leaving in year 3, that could mean up to $12,500 in combined fees - a significant deterrent to switching.
What is revenue sharing in Paychex 401k plans?
Revenue sharing is an indirect fee where Paychex receives compensation from mutual fund companies based on a percentage of assets invested in those funds. This is embedded in the fund expense ratios (ERs) rather than charged as a visible line item. The result is that plan participants pay higher fund ERs than necessary, with the difference going to Paychex. About 30% of Paychex 401k admin fees are covered through this mechanism.
What are alternatives to Paychex 401k?
Employee Fiduciary charges approximately 0.08% of assets plus $1,500/year flat - dramatically cheaper for growing plans. Guideline charges approximately 0.50% of assets with no revenue sharing and strong auto-enrollment features. Betterment for Business charges 0.25% of assets with modern investment options. All three have significantly lower fee structures than typical Paychex 401k plans, especially as plan assets grow.