Historically, small employers have steered clear of offering 401(k) plans, seeing them as complicated to establish and costly to administer. The rules for running a plan properly are admittedly complex. But increasingly, 401(k) management companies are helping to make the task easier, by providing plans geared to the little guys of the business world. If you are a small business owner considering initiating a 401(k) plan for your employees (and yourself!), here are ten of the top retirement plan providers. They not only offer affordable plans but can act as administrators and investment fiduciaries – relieving you of the headache-inducing homework that comes with any plan.
ADP's 401(k) plans offer investment options from more than 130 investment managers. Three investment line-ups are available for participants, based on their familiarity with investing and financial assets.
In addition to retirement plans, ADP specializes in payroll, tax filing, HR, insurance and administrative services. ADP’s small business division (1 to 49 employees) provides integration of payroll and recordkeeping with 401(k) plans, an important benefit for small employers.
Employees with existing 401(k) accounts have the option to transfer those plans into the new plan, and a mobile app lets employees check their retirement accounts from their smartphones and other devices.
With more than 360,000 retirement plans overall, American Funds provides 401(k) account options that can be tailored to any size company, including startups and those that have recently merged or made acquisitions.
Their plans include both traditional and Roth versions. Investment choices can be objective-focused (preservation, balance, and growth) or individual mutual funds.
Betterment for Business
A newer player, Betterment for Business started offering its 401(k) plans to smaller businesses in 2016.
As a robo-adviser, Betterment addresses many of the cost issues associated with the administration and management of a company 401(k) plan by using proprietary algorithms. In addition, Betterment says it eliminates fee hiding by using exchange-traded funds (ETFs).
Charles Schwab Index Advantage
Schwab designed its Index Advantage 401(k) plan to “lower costs, simplify investing and help workers better prepare for retirement,” to quote the company literature. The key is in the title: The plan uses index mutual funds or exchange-traded funds (ETFs) with low operating expenses instead of actively managed mutual funds. Schwab claims operating expense savings of 60% to 85%.
Automatic enrollment is available and employees can get help or use a self-directed brokerage account.
Edward Jones offers small employers a variety of options when it comes to investments in its 401(k) retirement plans. They include stocks, bonds, mutual funds, and government securities.
The company offers education and administrative support to both business owners and employees. After the plan is established, employees can review their accounts online or through mobile apps made available by Edward Jones.
Employee Fiduciary comes out of the gate offering to let business owners compare their current providers’ 401(k) fees to Employee Fiduciary fees. And indeed, Employee Fiduciary has very low fees. It costs just $500 to start a new plan or $1,000 to convert an old one. Small employers pay $1,500 a year for up to 30 employees plus 0.08% of assets under management.
Despite its low fees, Employee Fiduciary offers all the services of a full-price provider: tax return forms, annual report summaries and benefit statements.
Fidelity Investments has consultants to help business owners select a plan and then, once the plan is established, provides access for employees and owners via the internet. The company also offers a mobile app that allows employees to monitor their individual accounts.
Employees can transfer old retirement accounts into their new 401(k). Fidelity provides integration with payroll services, an advantage for small-business owners, as well as the full roster of services (plan administration, record-keeping, trading and investment advisory).
Merrill Edge lists streamlining, convenience and affordability as key advantages to its small business 401(k) plan. Also included are the usual benefits – tax deductions for the employer, investment fiduciary support and educational support for employees.
With an annual asset-based fee of .52%, Merrill boasts pricing that is lower than many competitors. Its plan includes online account management – a common feature in most 401(k) plans. An automatic enrollment option, as well as a Roth 401(k) option, are also available. Employers have the flexibility to contribute on a year-to-year basis.
ShareBuilder 401(k) has retirement plans specifically designed for small employers. There are four different 401(k) options – individual, simplified, customized and tiered profit sharing.
Each plan has distinct matching, vesting and profit-sharing options and once the plans are established, employees are able to transfer existing retirement accounts into their new 401(k) account. In addition, ShareBuilder retirement plans integrate with the majority of payroll providers.
T. Rowe Price
Advertising its small business 401(k) plans as appropriate for companies with fewer than 1,000 employees, T. Rowe Price says it offers a “cost-effective structure” for both sponsors and participants.
Investment options include a range of T. Rowe Price and non–T. Rowe Price investments. There is a plan sponsor resource center as well as 24/7 website access for participants. Sponsors may select from more than 90 no-load mutual funds and common trusts as well as over 5,400 non-proprietary funds.
The Bottom Line
Of course, nothing replaces due diligence and good old-fashioned homework when it comes to checking out various 401(k) plan providers. Make sure you ask enough questions and more important, the right questions when considering a 401(k) plan for yourself and your employees.