Retirement Plans
Rising benefit costs: uncover potential savings
How retirement plans can help ease pressure on benefits budgets
Benefit costs continue to rise
Benefit costs continue to rise
Employer-sponsored benefits—especially health coverage—remain a major and growing expense for many organizations. Survey-based estimates put average employer health benefit costs at about $17,496 per employee in 2025 (roughly 6% year over year), with projections exceeding $18,500 per employee in 2026 (about 6.7%)1. What’s driving this growth? There are a number of factors, including higher pharmaceutical spending, increased use of GLP‑1 medications, continued price inflation in healthcare delivery and growing utilization of services.2
Common cost-control approaches—and their tradeoffs
Common cost-control approaches—and their tradeoffs
To manage rising health care costs, employers often turn to familiar measures, from higher deductibles to employee premiums and narrower provider networks. These changes can limit employer costs in the short term, but they may also shift more financial responsibility to employees and affect benefits satisfaction—potentially influencing retention and engagement.2 Because workforce needs differ, organizations often face tradeoffs between affordability and the overall employee experience.
An often overlooked opportunity: retirement plan costs
An often overlooked opportunity: retirement plan costs
While health benefits are frequently reviewed during annual renewals, another significant source of potential savings is often overlooked: the company retirement plan. Plan fees and administrative costs can accumulate quietly, frequently escaping notice from both sponsors and participants.
Common sources of retirement plan costs include:
Common sources of retirement plan costs include:
- recordkeeping and administrative fees,
- investment-related expenses (such as fund expense ratios),
- advisory or consulting fees (where applicable),
- costs for participant tools and services (for example, managed account programs), and
- operational items such as audits or compliance support.
Through careful review and thoughtful restructuring of retirement plans, employers can uncover substantial savings that could help offset other rising benefit costs.
Why this matters: Take a more integrated view of benefits
Why this matters: Take a more integrated view of benefits
As overall benefit costs continue to rise, many organizations are taking a more holistic approach to benefits management. Rather than evaluating each program separately, employers are looking at how different components of their total rewards strategy can work together. This integrated approach may support both the financial health of the company and the satisfaction of employees in an increasingly competitive talent market.
Practical next steps for employers
Practical next steps for employers
Organizations interested in taking a closer look at retirement plan costs often start with:
- Compiling a complete list of plan fees and identifying who pays each cost;
- Reviewing service agreements and what is included (and what is optional);
- Benchmarking fees and documenting the review process;
- Evaluating investment expenses and available share classes;
- Assessing whether plan design features are creating unnecessary complexity.
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