Small businesses have often stayed away from offering employees 401k retirement plans. But this is changing. Providers are starting to specialize in plans that meet the needs of small businesses and take into consideration the financial structure and financial situation that small businesses find themselves in. But if you are a small business thinking about offering 401k plans for the first time, looking at these plans can be overwhelming. There are several options for the best 401k plan for small business, but which plan will fit your business’s specific needs?

 

To help small business owners narrow down the best 401k plan for small business that meets their needs, we have put together this list of the best 401k plans for small business. We’ll look at plans that meet the specific needs of small businesses and narrow down the best overall 401k plan for small business. These include low-cost plans and plans that give employers the ultimate flexibility. Read on to learn the best 401k plan for small business!

 

401k Plan FAQ

1. What Is a 401k Plan?

2. Who Should Be Looking at 401k Plans for Small Business?

3. Why Should Small Businesses Offer 401k Plans?

4. What Factors Should Employers Consider When Choosing a 401k Plan for their Business?

 

How We Reviewed the Best 401k Plan for Small Business

Piggy Bank with retirement savings chart

Source: Freepik.com

To provide small businesses with the clearest overall view of providers’ 401k plans for small business, we looked at each provider’s benefits, costs, specializations, options, and customer service to come up with this list of the providers with the best 401k plan for small business. In the end, we will conclude with the best overall 401k plan, but we have also come up with the best low-cost option, the best plan for services, and the best plan for flexibility because we know that small business owners have a variety of needs.

 

Overall Price Range of 401k Plans

The price range of the best 401k plan for small business can range from as low as $0 in fees and initial investment to as much as around $5,000 per year in fees and initial investments.

 

What 401k Plans We Reviewed

  • ADP
  • Fidelity Investments
  • Betterment for Business
  • Charles Schwab Index Advantage
  • Paychex
  • Edward Jones
  • Vanguard
  • Employee Fiduciary
  • T. Rowe Price

 

ADP

Features

Their 401k plans have flexible investment options from over 130 investment managers. They structure their plans in three different tiers. The basic sample line-up is for investors with little to no investment experience. The standard sample lineup is for those with average investment experience, and the advanced sample lineup is for those with advanced investing experience. ADP has advisors on hand to help employees select their plans or select a plan for them if they so request. After your employees are enrolled they have access to their account anytime through the ADP mobile app.

Pros

  • Combined services
  • Specializes in small companies
  • Flexible investment

Cons

  • Customer service responsive but slow
  • Customers experience significant upselling
  • Hidden fees

Price

ADP has many combined services that have different price ranges depending on the number of employees. Plans start at as little as around $480 in annual fees.


Where to Buy

https://www.adp.com/

 

Benefits

This provider might be one of the best options for small businesses if you are looking for a provider that combines your services. They offer small employers 401k plans, payroll, insurance, HR, tax filing, and other administrative services in one place. Their main focus is on companies that have between 1-49 employees and they have several different 401k plans for companies that fit this description. In addition to their combined services, they also have specific advisor services for choosing the right 401k plan for your employees.

Fidelity Investments

Features

Fidelity Investments provides a large variety of services including consulting services including plan administration, record-keeping services, trading advisement services, and investment advisory services. Their 401k plans have tax-deferred growth potential and contributions are tax deductible. Employers can match contributions. Fidelity Investments also provides communication and education programs for your employees to help them choose what’s best for their retirement.

Pros

  • Good for companies with more than 20 employees
  • Additional services
  • Educational tools

Cons

  • Long wait times
  • Customer service
  • Outdated tech

Price

Fidelity Investments has no account fees and no account minimums for small businesses.


Where to Buy

https://401k.fidelity.com/


Benefits

Their 401k plans are a good choice for small businesses that have over 20 employees. They also provide additional services that small businesses need. They also provide clients with a small business retirement specialist and have self-employed 401k retirement plans for individuals.

Betterment for Business

Betterment for Business logo

Source: business.betterment.com

Features

Betterment for Business is a new entry into the 401k space. They offer transparent pricing on their plans and they use ETFs to eliminate fee hiding. They also offer additional services that small businesses need like record keeping and personalized advice for employees. They also offer an easy-to-use platform that is intuitive.

Pros

  • Transparent pricing
  • Additional Services
  • Easy to understand and use

Cons

  • Better for hands-off investors
  • Digitally managed
  • No direct indexing

Price

Betterment charges .10% of planned assets.


Where to Buy

https://business.betterment.com/pricing/

 

Benefits

Betterment has a host of benefits for small businesses like additional support, and easy to use tools.

Charles Schwab Index Advantage

Features

Their Index Advantage 401k Plans are known for their low administrative costs. The funds in this plan are Index Funds and aren’t actively managed. They have advisor services on hand to help with any questions or concerns and they also provide interest bearing through Schwab bank. Enrollment is automatic and your employees can either use a broker or do a self-directed brokerage account. The plan has no annual fees and Charles Schwab also gives your employees access to their brokerage and banking services. They also have individual 401k plans that have no monthly fees or minimums and can be self-directed.

Pros

  • Good for low operating costs
  • Minimal Fees
  • Individual and traditional plans

Cons

  • Company cutbacks on retirement advisors
  • Relatively new 401k option
  • Rollover issues

Price

Charles Schwab charges small businesses $0 for account opening and maintenance and $0 for minimum investments.


Where to Buy

https://corporateservices.schwab.com/public/corporate/retirement-services/comprehensive-401k-plan-services/schwab-index-advantage


Benefits

This might be the best 401k for small business if your business wants a plan tailored to businesses who need low operating costs. Charles Schwab is also one of the most well-known and respected retirement plan providers, and they bring that expertise to their small business 401k plans.

Paychex

Paychex logo

Source: Paychex.com

Features

This might be one of the best 401k plans for small business if your business is looking for a provider that has payroll services. They pride themselves on being an all-in-one service that makes life easier for small business, but they started out as an HR/Payroll company so that is where they are strongest. They do this by combining payroll, HR, outsourced benefits administration, loans, and a plethora of other services.

They also pride themselves on providing low-cost alternatives to expensive 401k providers. They bill businesses on a per employee basis so that employers aren’t ever paying for an additional plan that they don’t need. They give small businesses access to their 100+ offices around the country for any customer service needs.

Pros

  • Affordable
  • All-in-one service
  • Customer service

Cons

  • HR/Payroll company first
  • Additional fees
  • Hard to terminate an account

Price

Paychex 401k pricing totals out to around $5,000 per year for a small business.


Where to Buy

https://www.paychex.com/retirement-services/401k-value

 

Benefits

The main benefit for small business is having a one-stop-shop for their services and especially for payroll and HR.

American Funds

Features

The benefit of the American Funds small business 401k plan is that it is flexible enough to fit any business. They offer more than 360,000 different types of 401k plans. There are multiple style options to choose from like Roth or traditional. They also let you invest by objective. That means you can choose between preservation, balance, or growth.

Pros

  • Flexible
  • Variety
  • Objective focused investments

Cons

  • Hidden fees
  • Higher fees on some plans
  • Expense ratio problems

Price

Prices vary by plan.


Where to Buy

https://www.americanfunds.com/individual/products/401k.html


Benefits

The main benefit of American Funds is how flexible they are. They will most likely have a plan tailored to your needs.

Vanguard

Features

Vanguard is known for their mutual funds but they also have several low-cost 401k plans that are perfect for small businesses. Some of these include professionally managed mutual funds and ETFs. While they don’t provide additional HR or payroll services, they do act as your money manager. Having a Vanguard 401k gives you access to over 100 mutual funds, diversified and low-cost ETFs, and target-date funds. Vanguard is a particularly good option if your small business already has a plan administrator because they are low cost and have easy integration.

Pros

  • Money manager
  • Lots of investment options
  • Low cost

Cons

  • No additional services
  • They outsource their customer service
  • Mediocre platform

Price

Vanguard has a yearly account fee of around $20 for small business 401k plans.


Where to Buy

https://retirementplans.vanguard.com/VGApp/pe/PublicHome

 

Benefits

The main benefit of Vanguard 401k plans is their management and the option of target-date funds, which are designed to maximize your retirement savings.

Employee Fiduciary

Features

The 401k plans at Employee Fiduciary have low set-up fees and low administrative fees. Employee fiduciary encourages you to compare their plan with your current provider. They are proud of the fact that they give the same investment choices as plans designed for large corporations. They give you options of up to around 380 different mutual funds to choose from, access to brokerage through TD Ameritrade, and low cost investing options like ETFs and index funds. They also provide tax forms, annual reports, benefits, and a helpline as added benefits for small businesses.

Pros

  • Access to brokerage
  • Low startup costs
  • Lots of choices

Cons

  • No additional services
  • Can be misleading
  • No fiduciary services

Price

The minimum price to start a 401k with Employee Fiduciary is around $500 or around $1,000 if you are looking to convert your plan.


Where to Buy

https://www.employeefiduciary.com/

 

Benefits

This might be the best 401k plan for small business if your business is looking for a plan that is suited for small employers. Small employers pay around $1,500 a year for 401k accounts for up to 30 employees plus around .08% of assets under management.

T. Rowe Price

Features

This is a good option for small businesses who are looking for plans designed for businesses with 1,000 employees or fewer. They have over 90 no-load mutual funds and common trusts and over 5,000 nonproprietary funds. Their mutual funds include stock funds, bond funds, target date funds, asset allocation funds, and money market funds. They deliver consistent returns while maintaining their low-cost prices. Over 75% percent of these funds have expenses that are lower than industry averages and none of them have sales fees. They also have 403b plans designed for non-profits and tax-exempt organizations.

Pros

  • Cost-effective structure
  • Low expense costs
  • Good for businesses with around 1,000 employees or fewer

Cons

  • No additional services
  • Not good for larger amounts of money
  • Customer service

Price

Pricing varies by plan.


Where to Buy

https://www.troweprice.com/personal-investing/home.html?PlacementGUID=od13cuKN&gclid=EAIaIQobChMIp_q0mqKo3wIVBcZkCh0pTQ11EAAYASAAEgKkB_D_BwE&mkwid=sod13cuKN_317502464149_troweprice_p_c&mtid=2550w6259815&slid=&product_id=

 

Benefits

The main benefit to small businesses is that the 401k plans are low-cost and effective.

 

The Verdict

The best 401k plan for small business overall is a provider that provides a solid plan and services that are necessary for small businesses, but most small businesses don’t have the time or expertise to perform well. This provider is someone like Fidelity Investments. While their fees are higher, their services are top rate. No matter which 401k plan you choose for your small business, we hope it suits you and your employees” retirement needs.

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