403(b) Fees: Why They Are Usually Higher Than 401(k) Fees
The 403(b) structure is not bad. The products sold inside many 403(b) plans are. Here is the full accounting of every fee type, what you are likely paying, and how to find out for sure. Updated 19 June 2026.
Every fee type, explained
| Fee type | 403(b) typical range | 401(k) typical range | What it is |
|---|---|---|---|
| Expense ratio (fund level) | 0.03% to 2.5% | 0.03% to 1% | The annual cost of owning a fund, deducted from returns. Index funds are at the low end; actively managed and annuity sub-accounts at the high end. |
| Mortality and expense (M&E) charge | 0.5% to 1.5% | Rare (0%) | Insurance fee embedded in variable annuity contracts. Pays for the death benefit guarantee. Does not exist in mutual fund plans. |
| Administrative fee | $0 to $100/year | $0 to $100/year | Annual account maintenance fee. Similar across both plan types. |
| Surrender charge | 5-8% declining over 5-10 years | None | Annuity exit penalty if you transfer or withdraw before the surrender period ends. Locks money in even if fees are high. |
| Sub-account fee | 0.1% to 1% additional | Minimal or none | Additional layer of fees within annuity sub-accounts, on top of the underlying fund expense ratio. |
| 12b-1 marketing fee | 0.25% to 1% | 0% to 0.25% | Fund marketing fee paid to the distributor. Some 403(b) fund classes include this; institutional 401(k) share classes often do not. |
| Wrap fee | 0.2% to 0.75% | Rare | An all-in fee charged by some group annuity contracts on top of fund expenses. |
| Rider fee (annuity) | 0.5% to 1.5% | None | Optional guaranteed income, death benefit, or long-term care riders in annuity contracts cost extra. |
Why the gap exists
Until 1974, 403(b) plans were legally required to invest exclusively through annuity contracts issued by insurance companies. This gave the insurance industry a 20-year head start building sales networks directly into schools, hospitals, and nonprofits that persist today.
When the 1974 ERISA reform allowed mutual funds in 403(b)(7) accounts, most school districts and hospitals did not update their plan structures. Insurance reps continued visiting campuses, building relationships with administrators, and being the only retirement representative most teachers and nurses ever met.
The conflict of interest is structural: reps from Equitable (formerly AXA Equitable), Voya, Lincoln Financial, and VALIC are insurance agents paid by commission. They are legally allowed to recommend products that pay them well, even if lower-cost alternatives exist in the same plan. They are not fiduciaries. Most never disclose their compensation to plan participants.
401(k) plans have been reformed differently. A series of class-action lawsuits against large employers in the 2010s forced plan sponsors to remove high-fee funds and add index funds. The competitive market for 401(k) plan sponsors (often large for-profit corporations with HR and legal departments) drove fees down. The market for 403(b) plans (often school districts and small nonprofits with minimal HR expertise) did not produce the same competitive pressure.
Named provider comparison
All-in annual cost estimates based on typical 403(b) products offered by each provider. Actual costs vary by plan and product. Check your specific fund prospectus for exact figures.
| Provider | Product type | Typical all-in fee | Notes |
|---|---|---|---|
| Equitable (formerly AXA Equitable) | Annuity | 1.5% to 2.8% | Rebranded from AXA Equitable in 2020; variable annuity products sold heavily into K-12 districts |
| Voya Financial | Annuity | 1.4% to 2.2% | Group and individual annuity contracts |
| Lincoln Financial | Annuity | 1.5% to 2.5% | Variable annuity contracts with rider options |
| VALIC (now Corebridge) | Annuity | 1.3% to 2.3% | Former AIG subsidiary; large presence in K-12 and healthcare |
| Horace Mann | Annuity | 1.2% to 2.0% | Specifically targeted at K-12 teachers |
| TIAA (mutual fund window) | Mutual fund | 0.1% to 0.8% | Wide range depending on product; institutional funds are low cost |
| Vanguard | Mutual fund | 0.03% to 0.2% | Low cost index and target-date funds |
| Fidelity | Mutual fund | 0.03% to 0.5% | Low cost index funds and managed options |
| Schwab | Mutual fund | 0.03% to 0.5% | Index funds and target-date funds |
Career cost scenarios (7% gross return)
$25K start + $400/mo, 2.0% vs 0.1% fees, 25 years
K-12 teacher: variable annuity 403(b) vs a low-cost index-fund alternative
High-fee result
$325K
Low-fee result
$459K
Fee cost
$133K
$50K start + $500/mo, 1.8% vs 0.05% fees, 30 years
Hospital worker holding a high-fee annuity instead of a low-cost plan
High-fee result
$669K
Low-fee result
$1.00M
Fee cost
$335K
$80K start + $700/mo, 0.5% vs 0.1% fees, 20 years
University professor in a TIAA plan; even a small fee gap costs five figures
High-fee result
$636K
Low-fee result
$677K
Fee cost
$41K
The fiduciary question
Most K-12 403(b) sales reps are insurance agents, not fiduciaries. A fiduciary is legally required to act in your best interest. An insurance agent is allowed to recommend products that pay them well, as long as the product is "suitable" for you. The difference is enormous.
The Department of Labor's 2024 Retirement Security Rule would have expanded fiduciary status to more rollover and annuity recommendations, but federal courts in Texas stayed it in July 2024 before it took effect, and it was formally vacated in March 2026. It never applied. Federal fiduciary status still turns on the older five-part test, and many in-plan 403(b) annuity sales by insurance agents fall outside it; annuity sales are instead governed by state insurance rules, most of which adopt a best-interest (not full fiduciary) standard. Always ask any 403(b) rep: "Are you a fiduciary? Are you required to act in my best interest?" If the answer is not a clear "yes", treat their recommendation with scepticism.
Useful resources: 403bwise.org tracks plan quality by school district and advocates for teachers. efast.dol.gov provides Form 5500 filings for ERISA plans.