How Much Does It Cost to Start a 401(k)?

Though 401(k) plans were once designed only with large corporations in mind, there are now attractive, low-cost solutions for the small businesses that employ 47.5 percent of American employees.

At Ubiquity, we design small business 401(k) plans to fit your needs and budget.

How to Find the Right-Priced 401(k) for Your Business

Whether you’re a solopreneur or a business owner with 100 or fewer employees, you deserve a fairly priced 401(k) plan that provides complete transparency, so you know exactly what you’re paying and why. While there are many 401(k) providers out there, not all are small business friendly.

Here are some 401(k) fees to watch out for:

• Assets Under Management fees – AUM fees are sometimes assessed as a percentage of your plan’s total account balance. If you have a 1.5% AUM fee, that means you’re paying $1.50 for every $100 in your 401(k) account. AUM fees are charged for a wide range of reasons – most commonly for investment advice and as an incentive for the custodian to grow your plan balance. Beware how AUM fees eat at your savings!
• Per-Person fees – Some 401(k) providers charge based on how many employees are in the plan. They justify this by claiming it costs more to provide record keeping and administrative services for more people. Often, the per-person fee is added on top of a flat rate fee.
• Transaction fees – Fees may be triggered by certain plan participant actions, such as changing a fund lineup or taking a loan from one’s 401(k) account. While these fees seem reasonable at the time, they can eat away at your savings – particularly when combined with an asset-based fee structure.

Flat fees are the most cost-effective model for small businesses looking to start a 401(k). You may be charged monthly, quarterly, or annually, but you are not penalized for the size of your account.

At Ubiquity, we charge a consistent, fully transparent flat fee. Each month, you pay the same 401(k) record keeping cost, so you don’t have to worry about pricing escalations or wonder if you’re getting the same rate as others.

In addition to paying a 401(k) provider for administration, you will likely want to select a broker who can help with investment choices and money management. Some administrators may have specific brokers they want you to use, but that is another way you could get locked into paying more. What if the broker charges a barrage of fees for services you neither want nor need?

At Ubiquity, you can choose whichever broker you prefer. While major brokerages may offer free plans, the offerings are limited compared to the fully custom plans and customer service you get from our professionals.