Find the Best Small Business 401(k) Plan

When you’re running a small business, the last thing you want to do is think about benefits.

But, offering a retirement plan to your employees can have a tremendously positive impact on both your business and your employees. A 401(k) plan can help your small business compete with larger companies for the best talent while lightening your tax load along the way.

So, it all comes down to choosing the right provider–and the stakes are high. Choosing the wrong plan could erode away your employee’s hard-earned savings or potentially open up your company to liability.

In a sea of options, it can be helpful to look for companies that specialize specifically in small business 401(k) plans. These providers offer retirement plans tailored to meet the specific needs unique to small business owners and their employees. Still, every small business is different and it’s important to research a plan and provider that fits with the goals of your organization. What investments do they offer? How easy is the platform to use? How much is all of this going to cost your business?

Small Business 401(k) Provider Comparison Chart

PROVIDER	America’s Best 401(k)	Ascensus	Human Interest	Merrill Edge	PAi Co-Pilot	Share- Builder	Ubiquity Retirement + Savings
Annual Pricing*	$3,460	$3,475	$3,660	$3,360	$2,670	$3,990	$2,445
PROVIDER FEATURES
Investment Flexibility**
Google review rating	2	3	2.9	2.8	2.6	N/A	4.1
Investment Advisory Services	Required	Optional	Required	Required	Required	Required	Optional
Financial Wellness Tools
Asset-Based Recordkeeping and Advisory Fees
Support multiple payroll integrations
Dedicated employee and employer phone / email / chat support	N/A
Dedicated Advisor support	N/A		N/A
Enrollment presentation for employer and employees	N/A		N/A

Disclaimer: Information was gathered from provider websites and third party sources as of fall 2019. Providers’ offerings may be slightly different from what’s denoted on their websites or as reported by third parties and therefore on this table.

*Based on 15 participant plan with an average of ~$20k in assets per participant. Pricing includes plan and participant fees for record keeping and administration, investment advisory fees where applicable, and custodial fees.
**Ability to create a custom fund list for your plan

How much will my 401(k) plan cost?

A pervasive and outdated myth exists that 401(k) plans have to be large, complicated, and most of all expensive operations. Luckily, in recent years, more affordable and easy to use retirement providers have popped up in the marketplace. This provides employers with a wealth of options to choose from when considering a 401(k) plan.

However, more options doesn’t necessarily mean more transparency. 401(k) plans can have complicated fee structures that make it difficult to understand everything you’re actually paying. In order to calculate how much a plan might actually cost you (and your employees) in the long run, it’s important to understand the basics of 401(k) fees and pricing.

401(k) Fee Types

Four main ways 401(k) fees and costs are charged

1. Assets Under Management Fees

Most 401(k) providers charge asset-based fees on total account balances. These are sometimes called assets under management (or AUM) fees. These fees are usually written as a percentage of the plan’s total assets you pay per year.

If you have a 1.5% AUM fee, that means that for every $100 in your 401(k) account, that’s a $1.50 that comes out of your account.
The way AUM fees operate, the more your account balance grows, the more the provider gets, and the less you and your employees see in retirement. Some providers may even charge a penalty if your plan doesn’t meet certain asset levels.
AUM fees can be charged for a wide range of things including investment advice and management, to compensate the custodian, or as investment fees.

2. Flat Fees

In contrast to AUM fees which charge based on the assets in the plan, some retirement providers charge one, standard fee. A flat-rate fee is a fixed monthly, quarterly, or annual fee that doesn’t grow based on the size of your account. These fees can vary widely depending on your plan provider and are typically paired in tandem with per-person fees.

3. Per-Person Fees

Some retirement plans charge fees based on how many employees are in the plan. This flat fee is assessed to all participants who have a plan balance and is called a per-person, per-participant, or sometimes a per-head fee. These fees are often used for recordkeeping and plan administration purposes and are most commonly found within plans with flat-fee structure.

4. Transaction Fees

Some plans/providers charge participants for making changes or performing certain actions in their plan–like changing their fund lineup or applying for a loan against their 401(k). As the name suggests, transaction fees occur when an individual executes one of these transactions.

While these fees don’t play a part in the price of the plan, frequent or high-cost transaction fees can slowly eat away at your employee’s hard-earned savings. Transaction fees can happen in tandem with both asset-based fee structures and flat-fee structures.

When choosing the best provider for your small business, make sure to look closely at exactly what kinds of charges are associated with each plan.

Will my company’s retirement plan be easy to set up and manage?

Setting up and managing a 401(k) plan shouldn’t take a computer science degree or extensive financial knowledge. You have a business to run, and you want a plan that works for you, not the other way around. That’s why it’s important to look for companies that offer a simple, easy to use experience for you and for your employees.

Integration

With so much on your plate, why spend time doing unnecessary data entry? Many 401(k) providers integrate payroll platforms and human capital management systems, making it easier to administer your benefits package all under one roof.

Look for a plan provider that incorporates easily into the things that already work well for your business.

Auto-Enrollment

When you’re offering your team a retirement plan, you’re offering them a valuable benefit that can help them secure a financial future. However, sometimes providing the option of saving in a retirement plan isn’t enough to encourage employees to actually use it. One way to encourage eligible workers to participate in a retirement plan is through automatic enrollment.

The IRS defines automatic enrollment as “a feature in a retirement plan that allows an employer to “enroll” an eligible employee in the employer’s plan unless the employee affirmatively elects otherwise.”

Offering auto-enrollment is proven to significantly boost participation rates in retirement plans. According to one recent study, after implementing Automatic Enrollment, the percentage of plans with more than 90% participation increased fourfold from 11% to 46%.

Small businesses owners should look for plans that offer auto-enrollment as an easy to implement, built-in feature. It makes it easier for everyone to save.

What support will be provided?

Robo-advisors and automated support are great, but when you have a problem with your account, it’s a human you want to speak with. When you’re searching for a retirement provider, it can be a good idea to research what kind of client support they provide. Some providers offer only online chat services, while others offer both online and phone support. Look for a 401(k) plan backed by staff that support you and your employees.

Is there a wide range of investment choices provided with the plan?

Many small business 401(k) plans offer only one brand of a fund or a very limited range of funds, which means you and your employees will not be able to choose from flexible investment options that help you best meet your goals. You should be able to choose from different families of funds.

Another thing to watch out for is any investment bias. Some providers offer their own funds within their 401(k) products. This can create a bias in what funds they favor in their plan offerings. Experts advise that you find a provider that is “product agnostic” meaning a company that isn’t associated with a specific investment company. You should be able to choose from different families of funds. There should also be tools available to make it easy to select and manage investments.

Will any employee education about the plan be provided?

Another way small business owners can encourage participation from their employees is employee education. Studies have shown that a comprehensive education program can significantly boost both participation and savings rates by eligible employees. An effective education program can help bridge any knowledge gaps by showing employees how to use and make the most of their 401(k) plans, as well as answer any questions and concerns they may have.

Look for a provider that provides this service free of charge and goes out of their way to make sure your employees feel supported and secure while saving for their futures.

Financial Wellness Tools

According to a 2017, survey from Mercer, employers can lose up to $250 billion a year due to employees’ stress about their finances. Some small business retirement providers are offering financial wellness tools bundled with their retirement plans, connecting employees with the tools and education they need to help them make smart decisions about their financial well-being. Your employees may have diverse financial needs, and coupling a 401(k) plan with a financial wellness program offers a holistic solution that can help address a wide array of short term and long term goals.

Overall workplace financial wellness has been linked to employee productivity and retention, which ultimately supports the company’s bottom line.

Have small business clients had a positive experience with them in the past?

We’re living in the golden age of starred reviews. The modern consumer won’t buy a blender or pick a brunch spot without looking at reviews to see if it is worth their money. So why would shopping for a 401(k) plan be any different? Sites like Google Reviews and BBB are a way to get a real insight of the true customer experience with a retirement provider, rather than just relying on testimonials selected and highlighted by the company.

Talk to Sales
Schedule a Free Consultation

Contact Support
Visit our Help Center
support@myubiquity.com
Monday–Friday
6am–5pm PT / 9am–8pm ET

© 2024 Ubiquity Retirement + Savings
44 Montgomery Street, Suite 300
San Francisco, CA 94104