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Whether you're looking into an employee retirement plan for your small business because you want to enhance your benefits package to attract or keep skilled employees, get ahead of impending state legislation requiring you to either sponsor a plan or register with the state, or for tax reasons suggested by your CPA or other financial advisors, there are multiple advantages.
Though best known for its payroll services, Paychex also provides HR services, business insurance and employee benefits – including retirement plan services – to businesses of all sizes, from sole proprietorships to large corporations with more than 1,000 employees. It also works with financial advisors. Paychex Retirement Services offers automatic enrollment options and a variety of retirement savings plans that include traditional, Roth and safe harbor 401(k) plans. It can bundle the record-keeping and third-party administration (TPA) to simplify plan management, and the company holds the title as the largest retirement plan record-keeper in the U.S. It works with your financial advisor or GuidedChoice to offer investment management and guidance to plan participants.
ShareBuilder 401k offers the best safe harbor 401(k) retirement plan for small businesses because in addition to making this popular type of plan affordable for small business owners, it takes on the fiduciary responsibility and performs plan administration, custodianship, record-keeping and advisory services – saving you the time and expense of working with, and overseeing, multiple companies to accomplish these duties.
ShareBuilder 401k specializes in providing full-featured 401(k) employee retirement plans to small business owners, from owner-only businesses to those with up to 100 employees. It offers a choice between the traditional, safe harbor and individual 401(k) plans – all plans have a Roth option for employee contributions.
Though commonly offered by large businesses, 401(k) plans used to be very expensive for small businesses; the rep we spoke with said that it previously cost between $5,000 and $10,000 per year to run this type of plan. Luckily, there are now plan providers like ShareBuilder 401k that have small business 401(k) retirement plans with lower costs. Here's what you can expect to pay.
Safe harbor 401(k). If you're switching to ShareBuilder 401k from another plan and rolling over $500,000 or more in plan assets, you may be eligible for lower setup, administration, and asset management fees than those listed here. Also, as your plan assets increase, your administration costs decrease; they're typically free for plans that reach or exceed $5,000,000 in assets.
Traditional 401(k). As with the safe harbor plan, you may be eligible for lower fees if you're rolling over assets of $500,000 or more. Likewise, your administrative costs may be waived when your plan reaches $5,000,000 in assets.
Owner-only 401(k). Also called an individual 401(k) or solo 401(k), this plan is only for business owners with no employees. Businesses with multiple owners are eligible, as are owners' spouses who work for the business. Pricing may be waived for plans that have $250,000 or more in assets.
Incidental plan sponsor fees. There are several fees for nonstandard services that are only charged if you these services. For example, if you need your IRS Form 5500 amended, it costs $100. Or, if you switch from a traditional 401(k) plan to a safe harbor 401(k), you would pay a $250 product migration fee. The full list is available on the company's website.
Plan participant costs: For all three plan types, participants pay the following fee.
Incidental participant costs: There are also fees for specific participant events. A full list of these fees is available on the webpage link above.
Safe harbor 401(k)s differ from traditional 401(k) plans in that they require employers to match or contribute a certain percentage to employee accounts, and contributions are immediately vested; matching and vesting are optional with traditional 401(k) plans. These Safe Harbor rules satisfy the IRS's nondiscrimination requirements, allowing business owners and highly compensated employees to make maximum contributions to their own 401(k) retirement accounts.
Here's a sampling of what ShareBuilder 401k offers with its Safe Harbor 401(k) plans.
Fiduciary support. ShareBuilder 401k serves as the plan administrator, custodian, record-keeper and ERISA 3(38) investment manager. As the plan sponsor, you oversee payroll contributions and complete a year-end checklist.
Account setup. To get started, you can fill out an online form and have an advisor call you, or you can call the company to immediately speak with an advisor. He or she will provide you with a quote specific to your business and go over plan details with you. You can then begin filling out the online plan paperwork. Your advisor can walk you through the setup process if you need help. It then takes a few weeks to roll out the plan.
Investment options. Participants can choose from five managed portfolios, or they can customize their portfolio from ShareBuilder's selection of low-cost, exchange-traded funds (ETFs) from Vanguard, iShares, PowerShares and State Street.
Fund research tools. On the company's website, you can view the roster of ETFs and managed portfolios. Each fund is linked to a Morningstar profile with information about the fund's strategy, historical performance, asset allocation and other details.
Advisory services. ShareBuilder 401k has an investment committee that helps plan participants diversify their investments by managing its model portfolios and investment roster of ETFs.
Reporting requirements. For both safe harbor and traditional 401(k) plans, you're required to submit the IRS Form 5500. The individual 401(k) plan carries this requirement as well, once your plan assets are $250,000 or more. ShareBuilder 401k prepares the form for you so all you need to do is sign and send it.
Loans. All three plans allow participants to take out loans against their 401(k) of up to 50 percent of their account balance, though it may not exceed $50,000.
You can call ShareBuilder 401k or fill out the form on the company's website to have an investment advisor call you. You'll work with this individual during plan setup and for plan support for the life of the plan. For other issues, you'll work with the company's administration team.
When we called the company as part of our testing, posing as the owner of a small business, we were quickly connected to an investment advisor who was personable and knowledgeable. He volunteered information about pricing, patiently explained the difference between different types of 401(k) plans and offered to email us a quote and additional information about the plans, which we received less than 15 minutes after our call ended.
If you prefer to learn about the company's offerings or troubleshoot issues online, you can read the basics on the ShareBuilder 401k website, but there isn't a searchable knowledgebase, blog or other resources. You can, however, find some of this information on the ShareBuilder website, but a lot of it hasn't been recently updated.
As mentioned above, the ShareBuilder 401k website doesn't have the same level of information as some of its competitors. This may be frustrating for small business owners who would rather find information online than call the company, but it posts its pricing, as well as a good overview of its offerings, and when we called the company, we had a positive interaction with the advisor we spoke with, who was happy to answer all our questions. It also lacks a mobile app, but the advisor we spoke with assured us that its website is mobile-friendly.
Even though 401(k) plans are one of the most popular retirement vehicles that businesses offer, small businesses often shy away from them because they can be expensive and complex to administer. Guideline is our pick for the best 401(k) plan for small businesses because it's not only one of the most affordable 401(k) options, but also one of the simplest, as it's a fully managed – or fully bundled – plan designed for small businesses.
Vanguard's individual 401(k) is the best self-employed plan because there's no cost to set up an account, and the only investment fees you pay are fund expenses – there are no sales loads or commissions on Vanguard exchange-traded funds (ETFs) and mutual funds to eat into your savings. In fact, one thing you'll notice as you look into retirement plans is that a lot of other companies offer Vanguard funds as well because of these low fund expenses. The company does charge an annual account service fee, but it's waivable, depending on your account balance.
In addition to individual 401(k) plans, Vanguard offers small business 401(k) plans, SEP and SIMPLE IRAs, as well as traditional and Roth IRAs. Vanguard has more than $5 trillion in investor assets under management and is the largest mutual funds provider in the world.
Investment experts caution against paying too much in investment fees because they erode your returns, and even small percentages can impact potential long-term savings. Vanguard's low fund expense ratios make it a popular choice among investors, and Vanguard is our best pick for individual 401(k) plan providers.
Individual 401(k) plans are best for self-employed people who want to save as much as possible in their retirement accounts, as you can contribute as both an employee and as an employer, and invest up to $56,000 per year (or up to $62,000 if you're age 50 or older). Like other 401(k) plans, you can save up to $19,000 as an employee, and you can choose between tax-deferred or Roth contributions. Then, as an employer, you can contribute up to 25 percent of your self-employment income.
Here's an overview of Vanguard's pricing for individual 401(k) plans.
Because this type of retirement vehicle is intended for higher savings, we didn't deduct points for the account service fees, since they're waivable with an account balance of $50,000. The rep we spoke with suggested investing in a single fund – such as a target date fund – to minimize this fee until you're eligible to have it waived.
Vanguard differs from many of its competitors in that it's an online brokerage – it doesn't have any physical offices where you meet with an in-person investment advisor. Instead, you set up your account and manage your investments online, which helps the company keep its costs low. It's also different in that it's not a publicly traded or privately owned company, rather it is owned by its investors. Here's more information on its features.
Account setup: You can download the Individual 401(k) Employer Kit from Vanguard's website. It includes instructions and all the forms you need to set up your account, including a plan adoption agreement and basic plan document. If you have questions or need help filling out the forms, you can call the company for help. Once you enroll as a Vanguard client, it takes seven to 10 business days to set up an individual 401(k) plan.
Investment choices: You can choose from more than 100 Vanguard mutual funds. Of these, 38 are index funds with Admiral Shares (a Vanguard share class that has a lower average expense ratio ranging from 0.04 to 0.45%, with an average of 0.11%).
Fund research tools: Vanguard provides multiple tools to help you research funds before you invest in them. You can do side-by-side comparisons, view historical charts that track a fund's performance, search funds by your investment objective and create a watch list to monitor specific funds.
Advisory services: You can call the company and speak with a representative who can offer you guidance on your investments, but this account type isn't available for Vanguard's personal advisory services.
Reporting requirements: If your account reaches $250,000 or more in assets, you will be required to submit IRS Form 5500. The company will provide you with the information you need to complete this form.
Loans. No loans are available from this account.
Rollovers. If you have an old 401(k) accounts from a previous employer, you can't roll it over into this account, but you can roll it over into a Vanguard IRA. If you call the company, a representative can help you set the IRA up and transfer your assets.
Withdrawals. Vanguard offers a free Required Minimum Distribution Service that calculates your RMD and can automatically deposit your money in your bank or transfer it to a nonretirement investment account.
Mobile app. Available for Apple, Android and Kindle devices, you can use the Vanguard app to check your account balance and performance, analyze your portfolio, research funds, read financial news, and buy and sell funds. Once your account has been open for at least 60 days, you can also use the app with the camera on your phone or tablet to make mobile check investments.
If you need help setting up an account, selecting investments or need to speak with an account representative, you can call Monday through Friday between 8:00 a.m. and 8:00 p.m. ET. You can also email the company for customer support. The company also offers a variety of searchable online help resources, including articles, FAQs, comparison charts, calculators and online lessons on financial topics such as getting the most out of your retirement plan, estate planning and saving for college.
When we called the company, posing as a small business owner, we spoke with a representative right away. The rep was patient and knowledgeable, asked about our situation and took the time to explain our options and the setup process. He disclosed fees and explained what they are, how to get them waived, and offered tips to minimize the fee until we qualified to have them waived.
If you want to trade stocks and options rather than invest in ETFs and mutual funds, other brokerages have lower trading fees. As mentioned above, Vanguard doesn't have physical brokerage offices, so if you prefer to meet with a financial advisor in person, this isn't the best option for you. Lastly, Vanguard charges an annual account service fee, and you need to have $50,000 in your Vanguard accounts to have the annual maintenance fee waived for the individual 401(k) plan.
A Savings Incentive Match Plan for Employees, or SIMPLE IRA, is a good retirement savings plan for small businesses with 100 or fewer employees. Self-employed individuals can also use it. It doesn't allow participants to save as much as 401(k) plans do and requires you as an employer to match or contribute to employee accounts, but it's easier and cheaper to set up and maintain than 401(k) plans. It also doesn't require you to submit an IRS 5500 tax form or submit to nondiscrimination testing.
Fidelity Investments offers the best SIMPLE IRA plan to small businesses because it doesn't charge any setup or plan maintenance fees, and the only costs for plan participants are trade fees and fund expense ratios – and its trade fees are some of the lowest in the industry. Fidelity also provides free access to advisors to help you and your employees pick investments. Fidelity is a leading financial services corporation that provides wealth management and brokerage services. It serves 28 million individual investors and holds over $7 trillion in customer assets.
One of the main reasons that many small business owners haven't yet offered a retirement plan to their employees is the expense – they worry that their business is too small and can't afford to sponsor a plan. If you share this concern and costs have been holding you back from offering a retirement savings plan for your employees, Fidelity's SIMPLE IRA may be the solution. Here's what you can expect to pay for this employee retirement plan:
The only thing that you, as the employer and plan sponsor, will need to pay is either a 3% match for employees participating in the plan or a 2% contribution to all employee accounts. However, this is a deductible expense.
Here's what plan participants can expect to pay:
Fidelity's SEP IRA and self-employed 401(k) plans share this fee structure. For businesses with 20 or more employees and an existing retirement plan to roll over, it has a 401(k) option; fees depend on the specifics of your plan.
SIMPLE IRA retirement plans aren't as stringently regulated as 401(k) plans. You don't have to file Form 5500 with the IRS or submit to nondiscrimination testing. However, this plan type is limited to businesses with 100 or fewer employees.
Account setup: If you call Fidelity and speak with one of its small business retirement specialists, the company will send you and your employees enrollment packets to fill out. If you don't want to wait, you can download the forms online. After it receives your paperwork, Fidelity can set up your account by the next day, according to the representative we spoke with.
Payroll integration: Fidelity supports electronic funding of participant accounts and works with payroll providers, though some payroll companies may charge fees for this convenience. If you handle payroll yourself, you can use Fidelity PlanManager – an online plan administration tool – to process salary deferral contributions for your employees as well as employer matches or contributions.
Investment options: Choices include bonds, exchange-traded funds, FDIC-insured CDs, mutual funds and stocks. The company notes that mutual funds are limited to those that waive investment minimums for SIMPLE IRA participants. You can view the list of eligible mutual funds on the company's website. In addition to Fidelity mutual funds, options include well-known fund families such as Janus no-load mutual funds, Morgan Stanley and Wells Fargo. Target-date funds are available.
Fund research tools: Fidelity provides a wealth of information about each fund, including a Morningstar snapshot, monthly fact sheet, prospectus and comparison tool.
Advisory services: You and your employees who participate in this retirement savings plan have complimentary access to the Fidelity Guidance Team. These advisors can help you choose funds for your investment portfolio based on your retirement goals.
Loans: No loans are available from this type of plan.
Withdrawals: As with most retirement plans, participants can begin withdrawing funds without penalty after age 59.5. Required minimum distributions begin at age 70.5.
Mobile app: Participants can manage their portfolios using Fidelity's mobile app or through an online portal. The app is available for Apple and Android phone and tablets, plus the Apple Watch, Apple TV, Kindle Fire tablets and Amazon Echo. Abilities vary by device, but on phones and tablets, you can monitor your portfolio and make trades.
You can call Fidelity's retirement team from 8 a.m. to 8:30 p.m. ET, Monday through Friday, or the company's general customer service number 24/7. The company representative we spoke with when we called the company posing as a small business owner, provided excellent customer service. He took the time to explain what the plan is, how it works and how much it costs. After answering our questions, he walked us through the steps to set up a plan on the company's website, demonstrating how easy it is to do.
In case you want to learn more about planning for retirement or investing, Fidelity provides multiple online resources, such as retirement-planning calculators, webinars, and articles about trading and investing, retirement planning, and personal finance.
This type of retirement plan has some limitations that aren't specific to Fidelity. For example, all contributions are pretax only – there is no Roth option. It has a lower contribution limit than 401(k) plans, and employer contributions are immediately vested.
As for Fidelity-specific limitations, although you can download application documents, there's no option to submit them electronically – you must mail them in, which is inconvenient. You also don't have a dedicated account manager or advisor to work with; rather, you contact the retirement team or the general customer support team for help or information about your plan.
Selecting the type of plan that's the best fit for you and your business is the first step. You have a variety of options to choose from, but some of the most popular types of employee retirement plans are traditional and Safe Harbor 401(k)s, Simplified Employee Pension Plan (SEP) IRAs and Savings Incentive Match Plan for Employees (SIMPLE) IRAs. If you're a sole proprietor, options include a solo 401(k) or a traditional or Roth IRA. For detailed information on these retirement plan types, check out our guide to small business retirement plan types.
After you've identified the type of plan you're interested in learning more about, it's time to look at plan providers. Many different companies offer employee retirement plans, but not every provider works with small businesses or has plans that are affordable for this market. Some only work with large businesses or those that have millions of dollars in assets. Others are expensive to set up and maintain, and some require you to work with several companies to keep you in compliance with Department of Labor regulations.
To help you find the best employee retirement plan companies, we looked for companies with the following qualities.
To determine the retirement services we think are best for small businesses in 2019, we spent dozens of hours researching the top providers. Here is an explanation of our selection process.
Our search for the best retirement plans began by asking small business owners which plan providers they work with and would recommend. To this list, we added providers we were already familiar with and those we found in our research and from reputable online sources. This brought our list to nearly two dozen retirement plan providers.
We then narrowed our list. We removed retirement plan providers that don't work with small businesses, are regional or offer limited services. We also eliminated companies that don't post their pricing on their websites, as it's inconvenient for a small business owner to have to call the company just to find out if the plans offered are within their budget.
With 10 retirement providers left on our list, we researched each company's offerings, prices, fees and terms. We examined the resources on their websites, such as knowledgebases, FAQs, and blogs, and looked up their Better Business Bureau ratings and complaints. We then called the companies posing as potential clients and asked questions about how the plans work, what it takes to set them up, and details about costs.
In our evaluation, cost, convenience and customer service were the factors that received the most weight in our scoring. We looked for plans with competitive pricing for both you as the plan sponsor and for your employees as plan participants. Where applicable, we also looked for all-inclusive providers that reduce your fiduciary burden and eliminate the need to hire multiple companies to serve your plan. Finally, we favored companies with patient representatives who took the time to explain how different plans work and sought to recommend the one best for the business we described in our testing scenario.
