The Best Employee Retirement Plans for Small Businesses 2022

Best Employee Retirement Plans

• Paychex – Best All-In-One Solution
• ADP – Best for Small Businesses
• Human Interest – Best for Affordability
• USA 401K – Best for Transparency
• ShareBuilder 401k – Best for Low Fees
• Perfect401(k) – Best for Easy Implementation
• Fidelity Investments – Best for the Self-Employed
• Guideline – Best for Compliance
• Vanguard – Best for Investment Flexibility

• Many employee retirement benefits providers also handle company payroll and other HR functions.
• Cost and investment options are important considerations when you are choosing an employee retirement benefits provider.
• You should expect sound service but not always investment advice from an employee retirement benefits provider.
• This best-picks page is for business owners who are looking for the best employee retirement benefits provider for their business.

Once your business has a team of employees, it’s best to set up an employer-sponsored retirement plan, which can help improve employee retention rates. Some states even require certain types of employers to offer 401(k) plans. To find the best employee retirement benefits providers for your business, look for vendors that offer plan design, administration, recordkeeping, auto-enrollment and easy integration with company payroll.

Business owners can expect to pay $20 to $200 per month for their employee retirement plan, plus $4 to $15 per employee per month to cover the cost of administration and recordkeeping.

Additionally, when small business owners set up a retirement plan, there are usually annual fees for administration, recordkeeping and filing preparation. Providers also may charge fees for serving as a plan fiduciary, conducting on-site visits, or preparing educational materials or newsletters. Some companies may charge separate annual advisory fees for assisting with plan design and serving as a resource for employees who need assistance.

Separately, many costs of small business retirement plans are covered by the expense ratios of the investments included in the plan. These fees are paid by mutual funds to the plan provider based on the amount of assets that plan participants have invested in the fund.

Key takeaway: Employee retirement plans typically charge a base rate ranging from $20 to $200 per month, plus $4 to $15 per employee per month.

Selecting an employee retirement benefits provider takes some research and careful consideration of your particular circumstances. Even after you settle on a platform, you should reassess it periodically to make sure you’re getting everything you need. Follow these steps to choose the right employee retirement benefits provider for your business:

1. Research providers.

First, survey the providers that offer different types of retirement accounts. You should consider what services and plans they offer and how much they charge.

2. Check out reviews.

Once you know what individual platforms offer, read customer reviews and keep an eye out for red flags. Pay close attention to the quality of customer service that customers have received, what problems they’ve encountered and the overall reputation of the provider.

3. Evaluate the investment selections.

When you’ve found a reputable firm that offers the type of plan you want, consider the kinds of investments it allows employees to make through that type of plan. Does the company give you the latitude to invest in what you want?

4. Review the fees.

Now that you know what type of plan you want, which providers are reputable and what kinds of investments they allow, take a careful look at your preferred provider’s fees for both the account you want and the investments you need. The total cost of a plan is an important factor in your final decision, so before you open an account, make sure you understand how much the plan will cost.

5. Reevaluate periodically.

After you choose a provider and set up an account, review both your account and the provider regularly to gauge their performance. Assess both at least annually to make sure you don’t need to make a change.

Anyone can set up a retirement plan for their small business, but there are significant advantages to using an independent provider. Here are just a few:

• Helps to attract and retain talent. The job market is competitive. According to a survey of 100 companies from Callan, 16% of companies planned to reinstate or raise their 401(k) employer matching contributions in 2022. A further 8% are thinking about raising their contributions. Business owners can use a solid retirement plan as a tool for recruitment.
• Improves productivity. Your HR manager will be a lot more productive (as will your employees) if everyone’s retirement benefits are handled centrally by a professional provider.
• Saves time for recordkeeping. Retirement plan providers have software that makes plan administration and recordkeeping totally seamless and largely automated.
• Reduces the pressure of compliance requirements. The professionals who work with retirement service companies are up to date on the regulations and familiar with current best practices. [Related: How to Borrow Against Your 401(k).]

Employee retirement benefits providers have many common features. Most offerings include certain core services, such as plan administration, recordkeeping and preparation of IRS filings. Some also handle plan design (investment selection) and employee enrollment, serve as a plan fiduciary, and sometimes even manage company payroll.

• Onboarding: Benefits need to be explained to employees as part of their enrollment. Some providers offer an introduction and/or training course to educate employees about the benefits available to them.
• Easy online administration: You should be able to handle your plan’s benefits administration online without ever having to visit an advisor’s office.
• Recordkeeping and compliance: Plan providers should handle all aspects of plan compliance, annual filings and necessary documentation.
• Investment selection: Most providers help you pick the investment options to include in your plan and guide you in employee eligibility and company 401(k) matching.
• Mobile enrollment for employees: Employees should be able to handle their account setup and maintenance via a mobile app or browser.
• Employee resources: Plan providers should serve as a resource for employees who have questions about their benefits, though most don’t provide investment advice.

Did you know?: Offering employee retirement plans helps your business as well as your employees. Learn how offering a 401(k) plan benefits small businesses.

Can I open a 401(k) on my own?

Anyone who has earned income and isn’t eligible for an employer-sponsored retirement plan can set up a 401(k) of their own. It’s not easy, but it can be done. The IRS has numerous administrative and recordkeeping requirements. There are forms that have to be filed at setup and annually – tasks that employee retirement benefits providers handle on a plan sponsor’s behalf.

Can you switch 401(k) providers?

If a 401(k) plan sponsor – a small business owner or self-employed entrepreneur with a 401(k) – is dissatisfied with their 401(k) provider, they can change providers. Making a change is typically inconvenient and involves meetings with employees for training and re-enrollment, but you can certainly do it if you aren’t satisfied.

How much can my business contribute to my employees’ 401(k) plans?

The IRS issues guidance on how much employers and employees can contribute to 401(k) plans each year. For tax year 2022, employers can contribute at most 100% of the employee’s total annual wages or $61,000 – whichever is smaller. This limit increases to $67,500 for employees ages 50 and older. However, the $61,000 figure represents the maximum allowed total for employee and employer contributions. Employees can contribute at most $20,500.

For tax year 2023, these figures will increase. The total maximum annual contribution will be $66,000, or $73,500 for employees 50 or older. Employees will be able to contribute at most $22,500.

Retirement options are only slightly different for small business owners with no employees other than a spouse. In that case, you can set up a self-employed 401(k) with a $20,500 annual contribution limit as of 2022 ($27,000 for people age 50 and over). Total employee and employer contributions cannot exceed $61,000. The corresponding figures for 2023 will be, respectively, $22,500; $30,000 for those 50 and over; and $66,000.

Has the COVID-19 pandemic affected retirement plans?

During the first nine months of the pandemic, 8% of employers suspended or reduced their 401(k) contributions. This trend has only continued since then, with major companies such as Amtrak and Lockheed Martin canceling their retirement benefits programs.

This may be a factor in the ongoing “Great Resignation.” According to WTW’s 2022 Global Benefits Attitude Survey, 47% of employees could be convinced to join a company based on strong retirement plan offerings. Similarly, 60% would keep working at a company with strong retirement benefits. These findings imply that companies that lack retirement plans may experience higher employee turnover.

Can my business save on taxes by providing an employee 401(k) plan?

Small businesses that have fewer than 100 employees and are setting up a retirement plan for the first time may be eligible for the Retirement Plans Startup Costs Tax Credit. For the first three years you offer a retirement plan for employees, you can earn a credit for up to 50% of the plan’s setup costs (up to $500 a year). Contributions for employer matching are also tax deductible.

Do I have to offer a 401(k) plan?

Some states have either passed or are considering legislation requiring businesses to provide a retirement plan or to register with a government-sponsored retirement plan. These laws are aimed mostly at larger businesses, but some apply to small businesses as well. For example, California now requires businesses with five or more employees to enroll in the state CalSavers program if they don’t already offer retirement benefits. Employers pay nothing for CalSavers and have few responsibilities, but noncompliance can result in a fine of up to $750 per employee.

Max Freedman contributed to this article.