For many dentists, the structure of a qualified retirement plan can feel like a black box. A typical plan involves several distinct parties: a law firm providing the plan document, a Third-Party Administrator (TPA) handling compliance and administration (though sometimes also providing the plan document), and an investment advisor managing investments. Each serves a legitimate purpose.
The problem often lies in how these providers charge for their services.
If you sponsor a dental practice 401(k) or another qualified retirement plan, understanding how administrative fees are structured can help you avoid paying more than necessary as your plan grows.
When Asset-Based Fees Stop Making Sense
Investment advisors traditionally charge a percentage of assets under management (AUM), usually ranging from 0.25% to 1.00% annually. However, many TPAs and plan document providers have adopted the same AUM-based fee structure for services that are largely fixed-cost in nature.
Tasks like Form 5500 preparation, nondiscrimination testing, plan document maintenance, participant notices, and distribution processing do not become more complicated simply because plan assets increase.
A plan with 12 participants and $500,000 in assets requires essentially the same compliance work as a plan with 12 participants and $5 million in assets. Yet under an AUM model, the larger plan may pay ten times more for the same services.
What Actually Drives Administrative Costs?
The true drivers of administrative complexity are participant count, payroll frequency, plan design, and ownership structure—not investment values.
TPAs often justify asset-based fees by pointing to fiduciary responsibilities under ERISA, such as serving as Section 3(16) plan administrators or Section 402(a) named fiduciaries. These responsibilities warrant reasonable compensation, but not compensation that automatically rises with asset values.
The fiduciary responsibility associated with signing a Form 5500 is the same whether the plan contains $1 million or $10 million. As plan balances grow, investment gains that should benefit participants instead generate automatic fee increases for service providers.
Remember Who the Trustee Is
The most important fiduciary role—that of trustee—already belongs to you.
A business owner serving as trustee can fulfill this responsibility without outsourcing every aspect of plan administration through a bundled, asset-based fee arrangement. Understanding who performs each service—and how they’re compensated—can help you evaluate whether your current plan remains cost-effective.
A Different Approach
For more than 50 years, Collier & Associates has sponsored qualified retirement plans for thousands of professional practices nationwide.
We charge a flat fee for plan establishment and document preparation, billing separately only when amendments are required. For ongoing administration, we recommend an actuarial firm that also operates on a flat-fee basis. As plan assets grow, administrative costs remain stable, predictable, and tied to the services actually provided.
On the investment side, clients retain flexibility. Some choose pooled investment accounts they oversee directly, while others use participant-directed platforms featuring low-cost index funds. In either case, the plan is not tied to a proprietary investment platform or asset-based advisory arrangement.
Working closely with our affiliated actuarial firm, we also offer retirement plan feasibility studies to help determine whether a 401(k), cash balance plan, or combination of the two may be appropriate for your practice. Because we serve a large number of clients, we’re able to keep costs competitive while providing highly customized plan designs.
The Bottom Line
A growing retirement plan should create more wealth for participants—not simply higher administrative costs.
If you’ve never reviewed how your retirement plan providers are compensated, now is a good time to do so. Understanding how administrative fees are calculated can help ensure you’re paying for the services you receive—not simply for the size of your investment account.
If you’d like to evaluate a dental practice 401(k), cash balance plan, or other retirement planning options, contact Collier & Associates at (216) 765-1199 or info@collieradvisors.com to request a retirement plan feasibility study.