How to Pick the Best Small Business 401(k) Plan Provider | 401ks


To attract and keep talented employees, it can be a smart move to add a 401(k) plan to your small business. As a result of the SECURE Act, which was passed in 2019, there are now more opportunities for small employers to offer retirement plans. The law allows small businesses to participate in pooled employer plans, making it easier and less costly for small employers to provide workers with a retirement plan. Here’s how to select the right 401(k) plan provider for your small business.


Research the 401(k) Plan Options for Small Business Owners

Think about both your employees and the company when selecting a 401(k) plan for a small business. “Not all plans are created equal, and a retirement plan can be customized to meet the needs of the business owner and the employees,” says Jon Anderson, head of retirement plan solutions at Cetera Financial Group in San Diego. For instance, a safe harbor 401(k) plan requires the employer to make annual contributions on behalf of employees. With a traditional 401(k) plan, the employer can elect to make contributions for all plan participants or offer a 401(k) match, but is not required to contribute. Employers must also decide whether to select an automatic enrollment 401(k) plan, which permits the company to automatically sign employees up for the plan and place salary deductions in certain investments.

Look at Small Business 401(k) Costs

Providing 401(k) accounts to employees will come with fees, and you should carefully sort through the fine print before making a decision. A small business 401(k) plan might charge recordkeeping fees, investment fees and transaction fees.

Keep in mind that fees might change if the company hires more workers. “Look to understand how the fees quoted may change as the plan grows,” says Hannah Walls, a retirement plan services specialist at Budros, Ruhlin & Roe in Columbus, Ohio. “Plans with the cheapest pricing upfront are not always the best plans over time, especially in high-growth sectors.”

Your company’s ability to contribute to the 401(k) plan should be evaluated from a short-term and long-term perspective. Ask “if the company can sustain their contribution if cash flow fluctuates,” Walls says. You might decide not to offer employer contributions to the plan initially to reduce the risk of depleting the company’s cash supply.

Consider the Small Business 401(k) Investment Options

Look for a 401(k) plan that provides an assortment of investment options, rather than just a few ways to invest. “One of the major things that you want to look for in a plan for small companies is what kind of lineup of investment options will be available to the employees,” says Mike Scarborough, president and CEO of Oak Wealth Partners in Lexington Park, Maryland. “It should be broad-based in the sense that it should have large and small stocks, various types of bonds, some international exposure that is very broad-based, as well as emerging markets.”

Consider adding features to the 401(k) plan that automatically adjust the allocation of investments based on an employee’s age. “These changes increase efficiency and give employers peace of mind that they are supporting their employees appropriately,” says Vince Morris, president of OneDigital Retirement + Wealth in Atlanta.

Carefully Select a Small Business 401(k) Provider

You’ll typically want to involve experts in the financial industry to help oversee the 401(k) plan. “These professionals can include third-party administrators, recordkeepers, investment advisors and investment managers,” Anderson says. “An investment advisor can also provide initial and ongoing financial education, expertise and support to employees when it comes to financial decisions in their lives.”

You might also consider the size of a 401(k) provider, as larger firms may have tools that make it simpler to manage the plan. “Consider using a major recordkeeper,” Morris says. “Because of their size, these companies have great technology, scale and critical cyber-security precautions in place.”

A financial professional can help you set up a 401(k) plan and communicate the retirement plan to employees. “Making sure the selected 401(k) provider is integrated with your payroll system is important and will help with administration,” Morris says.

Find the Best 401(k) Providers for Small Business

Since there are many providers to choose from, keep in mind that not all will offer the same services or prices. Some 401(k) plan providers will cater more to smaller companies, while others are set up for medium-sized or large businesses.

These providers specialize in 401(k) plans for small businesses:

  • American Funds
  • Charles Schwab
  • Employee Fiduciary
  • Fidelity Investments
  • Vanguard

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