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Talk to your board house.  4 mil slop for the soldermask around pads is excessive.  Leaving 4 mils is fine for larger parts, but as you say, it doesn't work for fine pitch.

The main reason for making the soldermask hole larger than the pad is to allow some room for mis-registration between the copper and soldermask layers.  Some error is inevitable, but 4 mil is excessive.

Another reason is to make sure the pins are touching the pad, not up off the pad a bit because there is a layer of soldermask under a corner or one edge of the pin.  Usually you make the pads a little larger than the pins anyway, but for tight pitch you usually do 50/50 pad and space between pads.

Again, ask your board house what they suggest for what works well with their capabilities and process.  If the answers sound wishy-washy, you may need a better board house.