According to Capital One’s Spark Business Barometer, only 13% of small businesses offer a retirement plan. Owners believe retirement plans are expensive, burdensome and complicated.
Designed Specifically for Small Businesses
Capital One promotes the program as one that offers low-cost, digitally managed 401(k) plans specifically designed for small companies with fewer than 100 employees.
There are 3 types of 401(k) plans – Traditional, "Safe Harbor" and Individual (for sole proprietorships). Each plan has a setup fee ranging from $125 (for Individual) to $750 (depending on plan type) ,and ongoing administrative costs of $15 per month to $100 or more. Traditional, which costs the most, gives owners the most flexibility in plan design.
The Spark 401(k) program oversees each plan’s investment fiduciary responsibilities at no additional cost. In addition, both owners and employees can access passively managed ETFs resulting in investment expenses of less than 1%.
401(k) retirement plans offer advantages to owners and employees alike. For employees, the main advantage is the ability to build a retirement nest egg on a tax-deferred basis. If the business owner provides matching contributions, there is further incentive to save using “free” money.
Owners can reduce business taxes, receive tax credits and use their 401(k) plan to recruit and retain employees for the long haul. Of course, owners can use the company plan to build their own personal retirement portfolio as well, saving even more on their personal taxes.
Digital Online Management
One important feature of Spark 401k is its digital construction that allows for online plan management and access to licensed 401(k) advisors and customer service representatives.
This frees owners to devote their time to their business and employees to manage their plans on their own schedule.
Filling a Growing Need
Capital One’s Spark 401k program is the latest retirement program designed for small businesses and sole proprietorships.
A directory published by the 401k Help Center lists more than 90 such providers as of January 2016. The 401k Help Center does not rate or endorse listed companies. Contact information is provided along with website addresses. For more see: 10 Providers With 401(k) Plans for Small Employers.