What Does a Dental Practice 401(k) Cost?

When a dental practice owner asks what a 401(k) costs, the answer they usually want is a dollar figure on an invoice. That’s understandable as it is concrete, and it feels like the variable that decides whether the plan is worth it.

On a well-designed dental 401(k), the fees you pay are largely secondary to two other numbers that matter far more. The tax savings generated by your own contributions, and the contribution capacity the plan gives you. When the plan is designed well, your tax savings from your own contributions and the employer contributions can potentially offset the cost of running the plan and produce a net tax savings.

So the real question isn’t “what does a 401(k) cost.” It’s “what’s the net tax savings after employee contributions and costs to run the plan, and how much contribution capacity does this plan give me.” Those two numbers, put together, tell you whether the plan is doing its job.

Most dental practice owners have never been walked through that distinction. Which is why many of the plans we review are paying fees for a design that caps the owner’s contribution well below the statutory limit.

What Does a Dental Practice 401(k) Cost?

A dental practice 401(k) is priced across several component layers, including administration and recordkeeping, the TPA if the plan uses one, investment expenses, and advisory services. Understanding which layer you’re paying for, and how much, is what separates a plan working for you from one working against you.

Administration and recordkeeping. Someone has to track who is in the plan, process contributions, file the annual Form 5500, send participant statements, and keep the plan compliant with IRS and DOL rules.

Smaller dental practices usually pay this as a flat monthly fee, sometimes with a per-participant charge layered on top. Bundled payroll providers typically fold part of this charge into the payroll invoice and the rest into asset-based charges you don’t see directly.

Third-party administrator (TPA). If the plan runs a profit sharing allocation or requires compliance testing, a TPA handles that work. The TPA builds the annual allocation, runs any required nondiscrimination testing, and prepares the plan document. This is usually a flat annual fee plus a per-participant component, and it’s paid by the plan sponsor.

Investment expenses. Every mutual fund and ETF inside the plan has its own expense ratio, deducted automatically from the fund’s returns. This is not a line item on your invoice. It sits inside the fund returns themselves.

The plan participants, meaning you and your staff, pay this every year whether you notice it or not. A lineup heavy on active or revenue-sharing funds could average around 0.60% per year. A curated, low-cost lineup leaning toward passive funds could run below 0.20%.

Advisory services. This is the work of designing the plan, selecting investments, acting as fiduciary, and guiding the practice owner through decisions as the practice grows. On a well-designed dental 401(k), the advisor coordinates with the recordkeeper, the TPA, and the payroll provider so the system runs cleanly. Without an advisor, that coordination falls on you or your office manager. That coordination problem is the focus of why coordination beats having too many advisors.

An honest all-in cost conversation adds every one of these layers together. The invoice is usually the smallest piece.

The Bundled Payroll 401(k)

Every plan sponsor, meaning every dental practice with a 401(k), receives two documents from their recordkeeper each year: the 408b-2 disclosure, which covers compensation to service providers, and the 404a-5 disclosure, which covers fees charged to participants. Both are required by Department of Labor rules, and both are usually formatted in a way that makes them hard to understand.

When you pull the 408b-2 and the 404a-5 on a typical bundled payroll 401(k), three fee layers surface. We break this structure down in bundled vs unbundled 401(k).

The monthly administration fee. This is the one you saw on the payroll invoice. A flat charge or a per-participant charge, usually in the low hundreds of dollars per month on a practice-sized plan.

The asset-based recordkeeping charge. This one is usually not on the sales quote but is clearly stated in the plan document. A percentage of plan assets, taken quarterly or annually from participant balances.

On a growing plan, this line item grows with you, so at $200,000 in plan assets it feels small and at $2 million it feels different.

Revenue sharing inside fund expense ratios. This is the quiet one. Many bundled providers steer the plan toward a specific fund menu, and some of those funds carry elevated expense ratios because a portion of the fund’s fees gets routed back to the recordkeeper as compensation. You do not see this on any invoice. Your employees’ returns absorb it inside the fund every year. More on how that works in how recordkeeper and payroll integration works.

Add the three layers together and the all-in cost is often far higher than the invoice suggests, for modest contributions and modest tax savings for the owner.

What makes the math worse is what the premium does not buy you.

Most of these plans come without Safe Harbor, which means every year, your plan is subject to annual nondiscrimination testing. That testing compares your contributions and your senior team’s contributions against rank-and-file participation.

When staff participation is thin, as it often is in the first few years of a new practice, the testing result caps your contributions at a fraction of the statutory limit. You don’t find out about the cap until the test runs, typically months after the year is over.

Most of these plans also don’t run a profit sharing allocation. Or if they do, it’s an inefficient allocation that doesn’t meaningfully benefit the owner. Not all profit sharing designs are created equal. Some allocate contributions in a way that heavily favors the owner, while others spread the money so evenly that the owner sees almost no advantage over a basic match.

The type of profit sharing allocation is the key. The right design can route the majority of employer contributions to the owner while still satisfying the IRS requirements for staff. The wrong design, or no design at all, leaves the owner’s contribution capacity capped at a fraction of what it could be. The plan type you choose drives this, which we compare in which plan type fits your dental practice.

A dental practice is a unique planning situation, and off-the-shelf 401(k) products usually miss the mark.

The Math on a Real Practice

Let’s work the numbers on a realistic scenario. Dr. Matt is a 34-year-old general dentist who owns a practice with his spouse. The practice has five eligible staff members, $250,000 in current plan assets, and the owners’ marginal federal tax rate is 37%.

The table below breaks down the numbers. The plan design combines maximum employee deferrals, an employer Safe Harbor match, and a profit sharing allocation. The key figures: how much the owners contribute, what the practice pays beyond that, and whether the tax savings cover the cost.

Hypothetical illustration, not a real client or actual results, and not a guarantee of future performance. Assumes a 37% marginal tax rate, the specific salaries, staff census, and 2026 IRS limits shown, and assumed plan sponsor admin fees (recordkeeper and TPA) of $4,530, which vary by provider and plan. Your practice’s math will differ based on compensation, employee participation, and plan design. Consult your CPA for tax deductions and credits.

	This Scenario
Owner(s) Retirement Contributions
Max deferral + employer Safe Harbor match + profit sharing	$99,308
Practice Out-of-Pocket (Non-Owner)
Employer contributions to employees	$20,572
Plan sponsor admin fees (recordkeeper + TPA)	$4,530
Total practice cost	$25,102
Tax Savings (37% Marginal)
Estimated plan tax savings	$46,032
Less: employer contributions to employees	($20,572)
Less: plan sponsor admin fees	($4,530)
Net estimated tax savings after all plan costs	$20,930

What the Plan Delivers

In the scenario above, the two owners together build $99,308 in retirement savings for the year, with about $20,930 in net tax savings after plan expenses, inside a 401(k) that is generally protected from most creditors under federal law.

Here is what the plan is doing for Dr. Matt. The owners are putting $99,308 per year into their own retirement accounts. The practice spends $25,102 on staff contributions and administration to make that possible.

The estimated tax savings on the entire plan ($46,032 at a 37% marginal rate) more than cover that cost, leaving roughly $20,930 in net tax savings after every plan expense is accounted for. The owners build retirement wealth, the staff gets a meaningful benefit, and the tax math covers the bill. Your numbers will depend on your compensation, staff participation, and tax situation.

That $99,308 is a single year. Contribute near that level across a 25-year career and let it compound, with the annual tax savings helping pay for the plan, and the result over time can be meaningful, dependent of course on your investment returns and consistent contributions.

Which Fees Change Your All-In Cost

Once you accept that contribution capacity is the bigger lever than headline fees, the fee conversation gets more precise. Three things are worth watching.

How the recordkeeper charges. Asset-based fees look cheap on a new plan and expensive on a mature plan. A flat-fee recordkeeper charges the same whether you have $200,000 in plan assets or $4 million.

The point isn’t that one structure is universally better. What matters is the total cost at the plan’s projected asset level, not the label on the fee schedule. Evaluate it both ways. Run the math at today’s balance and at what you expect the plan to grow into, and pick accordingly.

Who the fiduciary is. A 3(38) investment manager assumes discretionary responsibility for the plan’s investment lineup, under ERISA. That means the advisor chooses the investments and carries the fiduciary liability for those decisions. A 3(21) advisor only provides non-discretionary recommendations, which leaves the sponsor, meaning you, holding the final investment decision and the associated liability. For a practice owner already wearing five other hats, 3(38) is often the optimal choice because it delegates the investment fiduciary burden to the designated 3(38) advisor.

What the advisor does comes down to three things you should hold your current relationship to: an annual plan design review, TPA coordination when the allocation needs to move, and ownership of the call when something breaks.

A 401(k) advisor worth their fee is the head coach of the plan, coordinating every party so it runs the way it should. The TPA builds the profit sharing allocation each year. The advisor makes sure the allocation is designed to favor the owner, coordinates with you and your CPA when the plan design needs to move, confirms payroll is contributing correctly, and makes sure your office manager understands how the plan runs.

When something breaks, the advisor owns the resolution. That’s the minimum bar, in our view. Whether a particular advisor clears it is a question worth asking directly before you sign anything.

The plan with the lowest line-item fees and none of these features could be the more expensive plan in practice, as you may be missing out on plan design optimization.

What This Means for Your Practice

If your current 401(k) hasn’t been looked at in a few years, start by figuring out what the all-in cost actually is across every fee layer, not just the invoice. Most practice owners are surprised by where that total lands.

Then run the contribution math. If the plan doesn’t have Safe Harbor, find out what nondiscrimination testing capped your deferral at last year and compare it to the $24,500 employee elective deferral limit for 2026. The gap is contribution capacity you’re leaving on the table.

The right plan design depends on your collections, staff makeup, margin, and what you’re building over the next ten years. Whether a particular design fits your practice is a fact-specific question that should be evaluated with your legal, tax, and retirement plan advisors. But in most cases, the cost question answers itself once the design question is answered correctly.