The Best Employee Retirement Plans for Small Businesses 2019

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. 

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.

• They work with small businesses – even those that are very small, have never offered a workplace retirement plan before and don't yet have any fund assets.
• They have transparent pricing that makes it easy for small business owners to find plans within their budgets and compare costs.
• Pricing is also competitive, allowing businesses to establish quality plans for their workers at an affordable price.
• For 401(k) plans, they offer all-inclusive services with their plan offerings and include record-keeping, plan administration and advisory services in their costs.
• They have excellent customer service, with representatives who are willing to patiently educate first-time plan sponsors on their options and what they need to do to set up a workplace retirement plan.

Guideline is our pick as the best 401(k) plan for small businesses because it's a fully managed solution that takes care of everything for you: plan administration, fiduciary responsibilities, compliance, record-keeping and investment management. Traditionally, you'd need to work with multiple companies or financial professionals to perform these services, which made it difficult and expensive for small business to offer this type of plan. 

Guideline charges a setup fee and a monthly service fee. There are no custodian fees, advisory fees, third-party administration fees or assets-under-management fees. There is a plan agreement that you sign, but there is no length of service requirement so if you choose to close your account, you may do so at any time. There is a termination fee, but this is a standard practice due to the work involved in shutting down a plan and transferring assets. 

Plan participants only pay a mutual fund expense ratio, which is deducted from their portfolio assets. The company says that, on average, the expense ratio is 0.06 percent – which is very low – because it chooses low-cost index funds, such as those from Vanguard. There is no advisory fee, even though Guideline offers a selection of professionally managed portfolios for participants to choose from. Participants also have the option of building their own portfolio from a menu of more than 40 low-cost index funds. The only other fees that participants would pay are those associated with things like taking out a loan against their 401(k) or making hardship withdrawals. 

You can read a full review on our sister site, Business.com.

Spark 401k by Capital One is the best Safe Harbor 401(k) retirement plan provider for small businesses because it's affordable and includes all the services you need to effectively sponsor this type of plan for your employees. It serves as plan administrator, custodian, record-keeper, and investment advisor, eliminating the need to enlist the services of several financial companies and consultants. It also serves as the ERISA 3(38) fiduciary for the plan, easing your fiduciary burden as the plan sponsor. 

Spark 401k charges a setup fee and monthly administration costs. If you already have a business relationship with Capital One, such as a business credit card, you may receive a discount on the setup fee. Also, as your plan assets increase in value, the monthly administration costs decrease. There's no set contract length, so you can cancel your plan at any time. Like all other such plans, there is a termination fee that covers the costs of transferring assets and filing paperwork with the Department of Labor, as is required to shut down a retirement savings plan. 

Plan participants pay an asset management fee and fund expense ratios, both of which are lower than the industry average. The company's investment committee selects low-cost index funds for its model portfolios and investment roster, and if you choose to customize your portfolio, there are no transaction fees for ETF trades and purchases. 

Check out the full review of Capital One Spark 401k on our sister site, Business.com.

We selected Vanguard's individual 401(k) as our pick for the best solo 401(k) plan because it's affordable, with fewer fees and lower investment costs than its competitors. There's no setup fee – it's actually free to set up your account, and there aren't any commission fees or sales loads when you choose Vanguard ETFs and mutual funds. You will pay fund expense ratios, but Vanguard's are some of the lowest, which is why many other plans offer Vanguard funds. There is an account service fee that's charged annually for each fund, but it can be waived once your account assets hit a certain dollar amount – which should be manageable if you're interested in a solo 401(k) because it lets you maximize your savings. 

From Vanguard's website, you can download a kit with instructions and all the forms you need to set up your account. After you submit your paperwork, it takes between seven and 10 business days to create your account. You can then select your investments. You can choose from more than 100 Vanguard mutual funds, which includes 38 index funds with Admiral Shares (which have some of the lowest expense ratios). The website has tools to help you research funds before you make your selections. For example, you can search for funds by your investment objective, compare funds side by side and view historical performance charts. If you need help selecting your investments, you can call the company and speak with a rep for guidance. 

To read the full review of Vanguard, visit our sister site, Business.com.

We selected Fidelity Investments as the best Savings Incentive Match Plan for Employees (SIMPLE IRA) provider for small businesses for several reasons. First, as the plan sponsor, you don't pay any fees to set up or maintain the plan. There's no setup fee, monthly service fee, custodial fee or advisory fees. You pay just the employee match or contribution, as required by this type of plan. 

Second, the online trading fees that plan participants pay are among the lowest in the industry, costing $4.95 for online U.S. equity and option trades. Participants also pay fund expense ratios and trade fees. Although these vary, depending on the specific funds each participant chooses, you can keep these costs low by choosing commission-free exchange-traded funds (ETFs) from Fidelity and iShares. Other investment options include bonds, CDs, mutual funds and stocks. 

Finally, Fidelity provides complementary access to advisors who can help you and your employees pick your investments, so you can be confident in your investments. The company also provides several resources to help you learn about each fund, including a comparison tool, monthly fact sheet, Morningstar snapshot and prospectus. Once you've selected your funds, you can use the company's mobile app to monitor your portfolio. 

Read the full review of Fidelity Investments on our sister site, Business.com.

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.

Locating the Best Services

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.

Choosing the Best Services

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.

Researching Each Service

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.

Analyzing Each Service

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.