8 Key Features of a Good 401(k) Plan for Your Small Business

Author: Mike Cohen, AIF® / Reviewer: Callie Adams Farnsworth, QKA, CAFCA
17 Apr 2023 / 401(k) Plan Information, Small Business 401k

PSA: Not all 401(k) plans are created equally. So what does that mean for your small business? How do you know what to look for when evaluating different plans?

Here are the top eight features to look for when picking a small business 401(k) plan.

1. Thoughtful plan design.

Does the plan have different investment options? Does the vesting schedule work for your employees? Is it tailored to small businesses? Is it scalable for when your business expands? All of these things are green flags.

2. Potential for an employer contribution.

One of the most important aspects of a good 401(k) plan is employer contribution. This can come in many forms, including matching contributions or profit-sharing.

The best part of employer matching is that as the small business owner, you can contribute to your own 401(k) as both employee and employer, for a nice big total contribution of up to $66,000 in 2023 (or $73,500 if you’re age 50 or older).

(Wondering if you can make an employer contribution for your employees? We can help you figure it out.)

3. Diverse investment options are a plus.

A good small business 401(k) plan should offer a range of investment options to help your employees diversify their portfolios. This can include stocks, bonds, ETFs, and mutual funds. Diversifying the portfolio’s holdings has been proven to diffuse risk across various types of investment instruments.

It’s the financial equivalent of not putting all your eggs in one basket. This goes a long way toward setting yourself and your employees up for a secure retirement.

4. Low fees have high upsides.

Another important factor to consider is the fees associated with the plan. High fees can eat into your budget – or your employees’ retirement savings. Look for plans with low fees to help maximize savings. (In case you missed it, we’re known for low, flat fees.)

5. Plan administration (and other paperwork).

A good 401(k) plan should be compliant with all applicable laws and regulations. This includes regular plan audits and filings with the Department of Labor. Since you’re probably busy focusing on running your small business, it’s good to find a plan that can help you maintain the day-to-day logistics.

6. Opportunities for employee education.

An often-overlooked aspect of plan administration is participant education. Many employees, especially those who are newer to the workforce, do not have a solid financial education and may be hesitant to ask questions.

So, make it easy for them to learn how to manage their futures. A good small business 401(k) plan should offer plenty of resources to help employees understand the benefits of saving for retirement. Group meetings to review plan provisions and access to online resources such as the Ubiquity blog are a good start.

7. Your plan provider has a good reputation…

Choosing the right plan provider is critical to the success of a 401(k) plan. Look for providers with a good reputation and a proven track record of providing quality plans. (We’re ranked #1 on Google Reviews for small business 401(k)s. Just FYI.)

8. … And innovative tech.

In today’s digital age, choosing a plan provider that offers robust technology solutions is important. This can include online account access, payroll integration, easy-to-use investment tools and more.

 

 

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.

An evaluation has been conducted by Decimal, Inc. through its research of independent customer reviews on Google, Trustpilot, and the Better Business Bureau as reported by unaffiliated contributors on or before September 30, 2022, with a revaluation date on January 12, 2023, resulting in a better evaluation, for four similar small-business 401(k) providers in the marketplace.