Scrutinize: Asset Based Recordkeeping Fees?

Mar 19, 2026

The common practice of allowing asset-based charges for recordkeeping remains a trigger for allegations against ERISA retirement plan sponsors. As plan assets grow, so do the fees, often with no corresponding increase in service, creating a liability many sponsors dangerously overlook. Both plaintiff attorneys and defense attorneys point out that to avoid getting caught in a lawsuit, it’s imperative for plan sponsors to better scrutinize fees, and, ideally, involve a strong committee in this and other fiduciary oversight responsibilities.

Operating for the Exclusive Benefit of Employees

ERISA plaintiff attorneys can now leverage years of big, lucrative wins and settlements to mount “copycat cases” against the fiduciaries of smaller retirement plans. Artificial intelligence has also made it easier to search data from Form 5500 (which is publically available), for clues about plan fees, plan growth, and so on. Defense against ERISA allegations, even if nothing has been done wrong, rapidly becomes costly and disruptive for retirement plan sponsors. To avoid getting hit with a claim in the first place, both plaintiff and defense attorneys encourage retirement plan sponsors to double down on preventing the errors and oversights that trigger trouble.

As Jerry Schlichter, a plaintiff’s attorney with a string of wins against 401k plan fiduciaries, has told 401k Specialist Magazine, plan sponsors can most effectively avoid ERISA litigation through diligence vis a vis their responsibilities: “Operate the plan for the exclusive benefit of your employees and retirees. Follow that beacon and let that be your standard.” Applying this standard to the challenges associated with asset based recordkeeping fees, Schlichter specifically urges plan sponsors to take their oversight duties much more seriously:

What plan sponsors have to realize is that they cannot just allow asset-based charges for recordkeeping, without scrutiny. It’s not illegal to charge recordkeeping fees from the expense ratio. But if the sponsor allows that to happen, then they need to look at the charge per participant, because as assets increase or people add to their contributions in the plan, the recordkeeping fees will go up, without any more services from the recordkeeper. If they’re doing it with asset-based charges, they should limit the amount to $25 or $30 a person, and anything over that be returned to the plan and its participants.”

Rigorous Fiduciary Committee?

Toward reducing the risk of an ERISA lawsuit, Schlichter also advises plan sponsors to put more rigor into the appointment and training of committee members. Specifically, he shares these pointers for fiduciary committees:

Make sure these are people who have a serious willingness to undertake the responsibility, and put in the time. Make sure that some people on the committee have some expertise, and if they don’t, then you need to have a consultant brought in to advise you. You’ve got to inquire and require that there be no conflicts with your consultants in their recommendations.”
Hold regular meetings, and make sure committees do their work. I would suggest that they have at least quarterly meetings, and not setting them at 4 in the afternoon on a Friday, where everyone’s looking at their watch. Once they have the selection of funds in the plan, don’t put them on cruise control, not really doing any serious monitoring.”

Across the proverbial court room aisle, ERISA defense attorney, Ary Rosenbaum, also urges retirement plan sponsors to take fiduciary committees more seriously. Cautioning that “the 401k plan committee doesn’t know what it doesn’t know,” Rosenbaum offers these observations about how committees tend to function, versus how they should function, for strong plan oversight (and reduced litigation risk):

Committees rely on advisors. They should. Delegation is permitted under ERISA. Abdication is not. A committee that blindly accepts every recommendation without discussion is not exercising oversight—it’s outsourcing responsibility. Courts have been very clear on this point.If the advisor leaves the room and the committee cannot explain:

Why a fund was selected
Why a fee structure was accepted
Why a feature was adopted or rejected

…then the committee has a problem. Advisors should inform decisions, not

replace them….One of the most dangerous phrases in fiduciary governance is: “We discussed

that before.” Discussed where? When?By whom? And documented how?Committees often remember conversations that never made it into the minutes—or made it in so vaguely that they might as well not exist. Courts don’t credit institutional memory. They credit records.A good committee meeting:

Identifies issues
Weighs alternatives
Asks uncomfortable questions
Documents reasoning, not just conclusions

Are You Defense Ready?

Most retirement plan sponsors are not prepared for the costs of defending themselves should they be accused of an error or oversight (aka a fiduciary breach). As the U.S. Department of Labor underscores: “Fiduciaries who do not follow the basic standards of conduct may be personally liable to restore any losses to the plan….” Outsourcing plan services does not free you from your risks: as a sponsor, you choose the service providers and remain ultimately responsible for their success on behalf of plan participants and beneficiaries. You can even be held accountable for failing to adequately mitigate cybersecurity threats to the plan, or to curtail the damage from a breach.

If you face claims that you have made an error in carrying out your responsibilities as an ERISA retirement plan sponsor, the only type of protection that shields you personally is Fiduciary Liability Insurance. Colonial Surety Company offers an efficient and affordable Fiduciary+Cyber Liability Insurance bundle for retirement plan sponsors. For a few dollars a day, you’ll be armed with:

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Don’t wait for a DOL audit, a participant complaint, or a creative plaintiff attorney to allege you’ve made mistakes and accuse you of a fiduciary breach. Secure your business, your plan, and your personal assets today.

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