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One of the most popular retirement accounts for people to use when trying to build a nest egg is a 401(k). Because they’re only available through employers, a good 401(k) plan is an important part of attracting and retaining employees.
If you own a small business, make sure you offer an attractive 401(k) plan for your staff. Also be aware that as an added bonus, your employer contributions to such plans are deductible on your company’s federal income tax return, subject to some IRS limitations.
However, knowing which 401(k) provider to work with can be difficult. Here are some of the best companies to consider when choosing a financial services firm to manage your business’s retirement plan.
Best Overall : T. Rowe Price
Why We Chose It
T. Rowe Price is a well-respected name in the retirement planning industry, with more than 80 years in the business. It offers more than 100 mutual funds to plan participants, along with a wide range of funds from other firms, which allows your employees to invest the way they want to.
A defined benefit plan is one in which the amount the employee receives is defined by the plan instead of their own contributions. A traditional pension is an example of a defined benefit plan.
Employers such as state and local government agencies and some nonprofit organizations may offer tax-deferred 457(b) plans. Meanwhile, employers such as public educational institutions (public schools, colleges, and universities), certain nonprofits, and churches or church-related organizations may offer 403(b) plans.
This lets you tailor your retirement plan to the needs of your company.
Variety of investment options
Long history in the retirement plan industry
Variety of plans supported
Opaque fee structure
Best for Combined Services : ADP
Why We Chose It
ADP is a business services company that does more than just provide 401(k) services. The company also offers payroll, insurance, human resources, and tax services to small business owners. That makes it appealing to business owners who want a one-stop shop for all their needs.
The company’s 401(k) service is solid, with clear fees and access to more than 13,000 different investment options.
One-stop shop for business services
Transparent fee structure
Flexibility when determining plan features
Fewer investment options than other companies
Best for Low Costs : Charles Schwab
Why We Chose It
Charles Schwab is another major player in the financial services industry. It offers a variety of retirement plan options for business owners, including more simplified SEP and SIMPLE individual retirement account (IRA) options as well as 401(k) plans.
The broker’s accounts have no minimum deposit requirements, making it easy to get started. It also is known for keeping fees low. For example, the Solo 401(k) plan and SEP IRA have no maintenance fees.
Another benefit that can bring value to your employees is access to retirement planning tools and guides, along with 24/7 service and support.
Low-cost funds and low maintenance fees
Multiple account types available
Retirement education and planning tools
Fees for business 401(k) plans are not advertised
Best for Robo-Advisory Service : Betterment
Why We Chose It
Managing investments can be difficult, so some investors turn to robo-advisors for help. Robo-advisory services are computer programs that manage investments on your behalf.
If your employees to take want a hands-off approach to investing, Betterment’s robo-advisory service for 401(k)s might appeal to you. Another benefit is that Betterment offers other services, including integrations with popular business tools, payroll programs, and a dashboard you can use to track your company’s financial metrics.
Robo-advisory service for 401(k)s
Integrations with other business tools
Fees may be higher than the competition
Best for Low-Cost Mutual Funds : Vanguard
Vanguard is one of the largest investment companies in the industry and is well-known for its low investment costs.
If you want to give your employees access to passively managed index funds that let them invest with very limited fees, Vanguard offers some of the industry’s lowest expense ratios, such as a total stock market index fund with a fee of just 0.02%. It also offers low-cost target-date funds, which make it easy for your employees to choose investments and tailor their savings to their expected retirement years.
Simple fee structure with no asset-based fees for plan administrators
Low-cost investment for participants
Many account types offered
Works with third-party administrators rather than acting as administrator itself
Your 401(k) plan is a valuable way to attract and retain good employees—while receiving a company tax deduction. Choosing the right provider can make your 401(k) an important benefit that helps you and your employees save for retirement. When choosing a 401(k) provider, consider the fees, investment options, customer support, and any perks the provider might offer.
Compare the Best 401(k) Plan Providers
|Company||Account Minimum||Fees||Account Types|
|T. Rowe Price||Varies by plan||Varies by plan||Defined contribution plans, defined benefit plans, non-qualified plans, combination plans, 457(b) plans, 403(b) plans|
|ADP||Not disclosed||Monthly: $160 plus $4 per participant, plus 0.10% of eligible plan assets or $20.83, whichever is greater||401(k), Roth 401(k)|
|Charles Schwab||None||Varies by plan||Solo 401(k), SEP IRA, SIMPLE IRA, traditional and Roth 401(k)s|
|Betterment||Not disclosed||Monthly: $42 to $125 flat fee plus $5 to $6 per plan participant||Traditional and Roth 401(k)s|
|Vanguard||Varies by plan||One-time setup fee plus annual fees based on number of participants||Solo 401(k), SEP IRA, SIMPLE IRA, traditional and Roth 401(k)s|
How Do 401(k) Plans Work for Small Businesses?
A 401(k) is a retirement account that employers provide. Employees can put part of their paycheck into the account, and employers also can deposit money into these accounts to help employees save for retirement. They’re a good benefit to use to attract and retain talent and offer extra compensation to employees.They also offer a tax deduction to the sponsoring business.
How Do You Start a 401(k) Plan for a Small Business?
A small business owner can start a 401(k) plan by working with a retirement plan provider. These companies can help you fill out and file the paperwork to start your company's plan and help you administer it.
How Should I Choose the Best 401(k) Plan for My Business?
When comparing 401(k) providers, look at things such as the fees they charge and the investment options available. You want costs to be low and for your employees to feel like they have sufficient choices when it comes to investing their savings.
We are dedicated to providing readers with unbiased, comprehensive reviews and ratings of retirement plan providers. The author researched the offerings of nearly a dozen employer-based retirement plan providers. He then evaluated the providers based on factors such as the variety of retirement plans they offered, the cost to the employer and employees, investment options available, and their ability to grow their services as the employer's business expands.
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