If an Accounting Firm Misses This, What Does That Say About 401(k)s?

I was reviewing an accounting firm’s 401(k) plan — Evenhouse & Co. — and it’s hard to overstate how basic the issue is here.

Starting in 2016, a representative of a third-party wealth management firm appears on the Form 5500 as the plan administrator each year after. When a third party is serving in that role and signing the filing, that’s consistent with a 3(16) administrative fiduciary arrangement, meaning responsibility for plan administration has been formally handed off. You would expect a fiduciary in that position to be paying close attention to fee reasonableness.

But look at the administrative expenses on Schedule H, line 8f

2015 $47,530
2016 $40,338
2018 $48,104
2019 $48,288
2020 $50,526
2021 $58,388
2022 $57,023
2023 $56,040
2024 $62,978

This is a plan with about 20 participants and $8.2 million in assets, which now comes out to over $3,000 per participant per year.

But the most striking issue isn’t just the level of fees, it’s the tax treatment. When fees are paid out of participant accounts, they are not tax-deductible to the participants, they are effectively paid with after-tax dollars. If the same fees are paid by the employer, they are generally tax-deductible as a business expense. That’s not an advanced concept, that’s foundational. And this is an accounting firm.

In a partner-heavy firm like this, the partners likely have the largest balances and are bearing most of the economic cost either way. But under this structure, they’re doing it in the least efficient way possible, paying through participant accounts without the deduction and with far less transparency. The same dollars are being spent, just taxed differently.

At the same time, participation is high and contributions are strong (over $200k annually), which means the people contributing the most are also the most exposed to a fee structure that continues to rise. And when you look at the asset growth over time, a meaningful portion of the increase appears to come from consistent contributions rather than strong investment performance. For a plan with such significant contributions and assets, you would expect more scrutiny there.

What this really shows is something broader. If an accounting firm can miss something this basic for years, something involving fee structure, tax deductibility, and who is actually bearing the cost, it tells you how little transparency and literacy exist in the 401(k) system overall. And if participants don’t understand the costs and sponsors aren’t structuring them efficiently, then a real market never forms. Fees don’t get competed down, structures don’t get challenged, and they just drift upward over time.

If you’re a plan sponsor, it’s worth asking a simple question:

Who is actually paying your plan’s fees, and are they being paid in the most efficient way possible?