Vanguard's 401(K) Plan for Small Businesses

The Vanguard Group offers its Vanguard Retirement Plan Access, a 401(k) product, especially for small businesses. It makes it easy for new or modestly-sized employers to offer employees the same retirement savings benefits as larger companies.

These types of small business offerings from large-scale institutions can take a lot of the guesswork out of selecting a plan for small business owners who are less likely to know what to look for than trained benefits specialists at larger firms.

Key Takeaways

  • Small businesses looking to establish a 401(k) retirement plan for their employees can look to Vanguard to provide that service.
  • Vanguard is a well-known and respected financial institution that specializes in low-cost indexed investing strategies.
  • Because of this, Vanguard can provide a well-diversified and low-cost solution to smaller employers.

Why Vanguard?

Vanguard is one of the most respected names in the investment community, with a wide range of products, including mutual funds, exchange traded funds (ETFs), and retirement plans. Vanguard products are extremely popular and have a proven track record even among investors not managed directly with Vanguard.

For example, the Vanguard Institutional Index mutual fund is one of the most common funds included in 401(k) portfolios from any provider. This ultra-low-cost fund tracks the S&P 500 and (as of January 2023) has a five-year annualized return of nearly 9.51% with a very modest expense ratio of 0.04%.

To some degree, many 401(k) plans are alike in terms of how much can be saved and what kind of tax benefits are available. However, because Vanguard offers some of the most successful investment funds around and, in many cases, charges lower fees than its competitors, a Vanguard 401(k) can be an especially cost-effective choice.

What Is Included?

Just like any other 401(k), the Vanguard 401(k) product for small businesses offers professional management, a wide range of investment options, and a customizable product that lets employers dictate the specific terms of their plans. The small business 401(k) provides day-to-day plan support for the sponsoring employer, including real-time compliance testing to ensure the plan retains its tax-advantaged status.

Investment Options

Most 401(k) plans rely on mutual fund investments, and the Vanguard Retirement Plan Access product is no different. However, it provides access to a wide range of passively and actively managed funds, meaning participants can fine-tune their portfolios if they so choose.

This plan provides access to all of Vanguard's mutual funds and ETFs (covering a wide range of investment styles and asset classes), as well as over 10,000 outside funds. Participating employees may elect to invest in company stock through a self-directed brokerage account within the plan.


Like any other 401(k), Vanguard Retirement Plan Access allows employees to select the amount of each paycheck they want to defer to their retirement accounts. Depending on the terms of the plan, employees may also be able to make after-tax contributions to designated Roth accounts.

Vanguard Retirement Plan Access also accepts employer contributions. The sponsoring employer can tailor the plan to provide for direct contributions or employee contribution matching.

All contributions to Vanguard's small business product are subject to the same IRS limits as any other 401(k).

401(k) contribution limits in 2022 are $20,500, plus $6,500 in catch-up contributions for those over age 50. For 2023, the contribution limit rises to $22,500, plus $7,500 as a catch-up contribution.

Tax Benefits

One of the most appealing aspects of 401(k) plans is the tax benefits they provide for employees and employers. Like other products, the Vanguard small business 401(k) allows employees to set aside money each month without paying taxes on that income. Though income tax is due at the time of withdrawal, most people are in lower tax brackets after retirement, so their total tax burdens are reduced.

Employers can also lower their tax loads each year by contributing to employee retirement accounts. Under the Vanguard plan, like other plans, employers can deduct contributions to 401(k) accounts up to 25% of employee salary.

What Does the Vanguard 401(k) Cost to Set Up?

There's no fee to establish an account, but Vanguard does charge $20 a year for each fund held in a Vanguard Individual 401(k) account, which is waived for all participants in the plan if at least one participant has at least $50,000 in qualifying Vanguard assets.

To maintain transparency, the Vanguard plan offers a detailed expense report that outlines exactly where each nickel and dime gets spent and provides employers with a single comprehensive expense figure.

Can a Vanguard 401(k) Be Established as a Roth 401(k)?

Yes. Vanguard can implement either a traditional 401(k) using pre-tax dollars, or a Roth 401(k) that uses after-tax contributions.

How Much Can Employers Contribute in a Vanguard 401(k) Plan?

As a business owner, you can contribute both as an employer and employee. The combined amount of employer plus employee contributions cannot exceed $61,000 for the 2022 tax year and $66,000 for 2023. For those age 50 or older, the contribution limits are $67,500 for 2022 and $73,500 for 2023.

The Bottom Line

Historically, offering 401(k) plans has proven expensive for small businesses; products designed for large-scale operations end up charging the same fees for the setup and administration of small plans as they would for larger corporate plans. Since many small businesses don't employ trained benefits specialists, the person selecting the plan may not know what to watch out for.

Vanguard Retirement Plan Access is transparent and reduces fees wherever possible. While all 401(k) plans require administrative fees, small businesses don't require the same amount of work as larger plans, so lower fees make sense.

Article Sources
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  2. Vanguard. "Vanguard Institutional Index Fund Institutional Shares (VINIX)."

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