Best 401k Providers: Choosing for Your Small Business

Author: Siân Killingsworth / Reviewer: Callie Adams Farnsworth, QKA, CAFCA
1 Jun 2020 / 401(k) Plan Information

The average small business pays FIVE TIMES the fees for their 401(k) plan than what Fortune 500 businesses pay.

Fortunately, a new breed of small business 401(k) plan provider has emerged. These plan providers have tailored their businesses to offer high-quality, low-cost, user-friendly solutions geared toward entrepreneurs, startups, and companies with 500 or fewer employees.

Ubiquity is frequently mentioned among the best 401(k) providers for small business clients – as we are the only company that has offered flat-fee 401(k) plans with no hidden costs since 1999.

What makes the best small business 401(k) provider?

Consider the following factors in choosing a 401(k) provider for your small business:

Cost

Cost, of course, is a major factor for businesses with smaller budgets. Fees can have a huge impact on your plan’s overall success, even if the fees are less than 1% of the assets managed.

Ideally, you will find a plan provider that does not charge AUM fees or per-employee fees. Some of the automated providers masquerade with unusually low prices but add on fees for each employee managed that escalate the overall cost of the plan. Brokers and plan providers may each charge AUM fees that cut into your returns and total thousands of dollars in the long run.

Ease of use

Small businesses tend to be short on time, particularly when it comes to running an optional 401(k). Unfortunately, 401(k)s are tightly regulated, and they do require a lot of work to keep in compliance with government regulations. Audits can be costly and compliance testing a hassle – which is why it’s imperative to choose a plan provider that takes this complex, tedious work off your hands.

Flexibility

Some providers have specific plan design limitations or require that you go through their preferred broker, while others grant you the freedom to choose and change brokers or plans as you see fit. This freedom can expand your investment options, improve portfolio performance, reduce investment fees, and help employees meet their goals.

While most employees will be fine with a simple lineup of low-cost index funds, others may want access to a broader range of investments. As an employer, you may want to call the shots regarding whether or not to allow loans, vesting schedules, Roth contributions, and employer match adjustments.

Employee experience

The right plan provider will help you gain a competitive advantage in attracting and retaining talent.

Some providers are willing to help boost employee participation and savings rates. Financial wellness tools help your workers save enough for retirement, easing their anxieties and improving their workplace productivity as a result.

Who are considered the best 401(k) providers?

According to Fit Small Business, the 10 best small business 401(k) providers include:

Ubiquity – perfect for those who want easy setup and the freedom to choose their own broker
Vanguard – ideal for a low-cost, easy-to-setup Solo 401(k) with a well-known name
Sharebuilder – an all-online plan with low-cost investments and easy administration
Charles Schwab – offers additional banking and investment brokerage services
Fidelity – helpful if you want a large network of offices and in-person guidance
E-Trade – a DIY source for active trading
TD Ameritrade – a traditional provider and alternative to Vanguard
IRA Financial – for businesses who want alternative investment options
Merrill Edge – offers business and investment services under one roof
Rocket Dollar – offers self-directed Solo 401(k) with checkbook control

How does Ubiquity compare to the best 401(k) providers for small business?

Other names you may have heard of include Ascensus and PAi/CoPilot. Ubiquity has a lot in common with these two providers. We all boast low-cost and dedicated advisor support. Like Ascensus, Ubiquity offers:

Full investment flexibility
High Google review rating
No AUM fees
No per-person recordkeeping fees
Enrollment presentations
Support for both employers and employees

Yet, we are different from Ascensus in that:

We provide additional online financial wellness tools for employee engagement
We do not force you to pay investment advisor fees
We support multiple payroll integrations so you won’t have to change anything