Best Small Business 401k Plans

Best Small Business 401k Plans

Best Small Business 401k Plans Skip to content

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Best Small Business 401k Plans

By Paul Williams Date February 08, 2022

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Finding a good small business 401k plan for you and your employees can be daunting. Nearly every financial company offers some kind of option now, and financial advisers are clamoring for your business. But how do you know if you’re getting a good deal? What does a good 401k plan look like, and where can you find one? This guide will give you tips on finding the best small business 401k plans along with three suggestions for good 401k plan administrators.

4 Factors for Finding a Great 401k Plan

To start, here are four factors you should consider when trying to select the best small business 401k plan: 1. Plan Fees and Costs – It’s no secret that 401k plans can have hidden costs and layers of fees that eat in to your investment returns. Some plans will cost you 2% or more of the plan’s assets every year! When evaluating a 401k plan, you’ll want clear answers on the setup costs, administration fees, any wrap fees or investment management fees, mutual fund expenses, and 12b-1 fees. If you’re comparing several options, make sure you look at the total costs for each plan. The lower the fees, the better the plan will be for you and your employees. 2. Investment Options – Depending on the 401k provider you choose, you could have anywhere from very few investment options to unlimited investment options. It’s better to have more options because you’ll be able to choose the best funds for your small business 401k. You’ll especially want to be sure you can include low-cost index funds as an option for your employees.
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Get Priority Access 3. Customer Service – Obviously, you want to use a company with a good record of excellent customer service. Choosing a low-cost 401k plan provider won’t be wise if you or your employees can’t get help when you need it. To help gauge customer satisfaction, you may be able to find reviews online or get a referral from other small business owners. 4. Robust Record Keeping & Administration – Finally, you want to use a 401k provider that has a strong system in place for keeping records and administrating the plan. You want a company that keeps off-site data backups, uses a continuity plan, and has the staff to manage the plans they administrate. The last thing you want is to lose all your employees’ 401k records to poor planning.

Top 3 401k Plan Administrators

As a financial planner, I’ve done some research to find good 401k plan administrators that I can recommend to my small business clients. The one you should use really depends on the size of your business and the totals assets you have in your company’s 401k plan. Here are my 3 favorite: 1. Vanguard – If you’ve got at least $10,000,000 in your company’s 401k plan, Vanguard is a great choice as a 401k plan administrator. You’ll have access to all of Vanguard’s funds and you’ll get great service at a low cost. You’ll want to check out their site information directed towards institutional investors for more information. 2. Pension Specialists, Inc. – For mid-sized businesses (around 30-40 employees) and smaller 401k plans ($3-5 million), Pension Specialists offers comprehensive 401k plan administration and service. As of September 2010, they have a setup fee of $1,600 plus $15 per employee. They charge a base fee of $4,500 plus $75 per employee for annual record keeping and administration with a minimum of $8,000. This is why it makes more sense for mid-sized businesses than smaller companies – you’d want at least 30-40 employees before considering Pension Specialists. Otherwise you simply can’t rationalize the costs. These fees may vary depending on the complexity of your plan, but they’re a good starting point. Additionally, the custodian they use charges about 0.05% of plan assets for its annual custodial fee. 3. Employee Fiduciary – Finally, for small companies and small 401k plans (less than 40 employees and less than $5,000,000 in plan assets) Employee Fiduciary is the low-cost leader. As of September 2010, they charge $500-$1,000 for a setup fee. They charge a base fee of $1,500 for your first 30 employees plus $30 per employee after that for annual record keeping and administration. Employee Fiduciary is a good choice for smaller businesses because they don’t have as high of a minimum fee as Pension Specialists. All three of these 401k plan administrators are great choices for your small business. They all have much lower fees than most 401k plan providers, offer just about any investment option you could want, provide great customer service, and have strong systems for record keeping and administration. This means you could end up saving 50-80% on your 401k plan’s costs while providing better investment options to your employees. It’s a great deal for everyone! P.S. If you’re not a business owner, this is still important! Talk to your employer about comparing the costs of your current retirement plan provider to one of these low-cost options. You may be able to save the company money and improve your 401k plan (for yourself and everyone else). It’s worth mentioning at the very least. Invest Money Retirement Small Business TwitterFacebookPinterestLinkedInEmail
Paul Williams
Paul Williams is a financial planner in Lancaster County, PA. He's the founder of Provident Planning, Inc., a fee-only financial planning firm, and writes regularly on Provident Planning's website. Provident Planning is dedicated to exploring God’s Provident Plan for the personal finances of Christians. What is God’s Provident Plan? It’s God’s clear Biblical message that through contentment in Christ, hard work, and good stewardship Christians can prosper so we can give generously in the name of Christ. By following the Provident Plan, Christians can glorify God through their finances.

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