Offering a retirement savings plan to your employees is an essential component of any HR operation, regardless of the size of your company. The trick is to select a 401(k) provider that can deliver quality retirement plans, financial advising services, and administrative assistance for small businesses. SEP-IRAs, SIMPLE IRAs, and individual 401(k) plans are viable options for self-employed and small company owners looking to save for retirement. Still, regular 401(k) s remains the most popular choice.
For those who participate in traditional 401(k) plans, the IRS sets a maximum contribution limit for pre-tax contributions to an individual retirement account. There is also the option for employers to contribute or match contributions on behalf of employees, as well as the IRS limit.
Choosing a 401(k) Provider
For starters, you'll need to find a company that offers the retirement plan type you're looking for, whether it's a 401(k) or something different. The plan's qualifying rules, vesting timeline should also examine investment alternatives and other aspects to verify that they are acceptable for your employees. Your retirement plan's fees will also need to be taken into consideration. Depending on the size of your business and the number of employees, you'll need to contact each service provider to acquire a price.
Small Business 401(k) Providers
These seven small company 401(k) plan providers have earned excellent reputations and are worthy of your consideration in 2022.
ADP
In addition to payroll processing, ADP offers a full range of HR and employer services, including retirement plans and administrative management. ADP is unusual in that they provide their complete suite of services and decades of experience to small businesses and major corporations (which they describe as companies with one to 49 workers).
The American Funds
American Funds offers 401(k) account alternatives that it may adapt to any firm size, including startups and those that have recently merged or acquired, with a total of more than 360,000 retirement plans. Traditional and Roth options are available. 4 Individual mutual funds or objective-focused investment options are available.
Enhancement of Business
When Betterment for Business launched its 401(k) programs for small businesses in 2016, it was relatively new. Betterment is a Robo-advisor that uses proprietary algorithms to solve many costs involved with administering and managing a workplace 401(k) plan. Furthermore, Betterment claims to minimize hidden fees by utilizing ETFs (ETFs).
Index Advantage from Charles Schwab
According to company material, Schwab created the Index Advantage 401(k) plan to "reduce expenses, simplify investment, and help workers better prepare for retirement," according to company material. It's all there in the name: Investments are made in low-cost index mutual funds or ETFs rather than actively managed mutual funds. Schwab claims to have saved up to 82% on operating costs.
7 All of Charles Schwab's brokerage and banking services, including an interest-bearing, FDIC-insured savings account, are included in the plans, with no annual fees. A self-directed brokerage account is offered for employees who choose to take control of their financial future.
Considering a 401(k) Match for Employees
A 401(k) plan is a popular means of saving for retirement for many workers. To attract and retain top talent, "a company's contribution to the retirement plan has become a major recruitment and retention tool," says Eric Shisler of Columbus-based Budros Ruhlin & Roe as vice president and director of retirement plan research and services. You can match a certain proportion of an employee's contribution up to a certain percentage of their pay by offering a matching benefit.
It's also possible to provide financial assistance in the form of a matching grant. Companies can also contribute to their employees' retirement funds via the 401(k) profit-sharing plan, which allows them to set away a part of their pre-tax income for this purpose. You can donate a fixed monetary amount or a percentage of each employee's pay.
Consider Small Business 401(k) Costs
A 401(k) plan comes with costs, and you should carefully read the tiny print before deciding on a plan for your employees. Recordkeeping fees, investment fees, and transaction fees are all possibilities in a small company 401(k) plan. It's essential to keep in mind that its fees might alter as it recruits additional employees. Shisler advises prospective clients to watch how the rates mentioned may vary as the plan expands. Even with well-funded programs, the cheapest plans aren't usually the most affordable in the long run.
Consider Your Small Business 401(k) Options
Ensure that the investing alternatives in your company's retirement programmer are diverse rather than limited to just one or two types of investments. Oak Wealth Partners CEO Mike Scarborough believes one of the most important aspects of a plan for small businesses is what sort of investment alternatives employees will choose from. Because of this, the portfolio should be broad-based in the sense that it should include major and minor stocks, a variety of bonds, some foreign exposure, and developing markets.
Selecting a Small Business 401(k) Plan
Specialists in the financial business should oversee the 401(k) plan. Art Haws, CEO and managing partner of Haws Goodwin Wealth in Franklin, Tennessee, says, "Many folks in the financial services sector may sell you a plan, but normally there are select advisers that specialize in working with 401(k) s." As you begin and manage your plan, they may assist you in navigating the various difficulties and decisions that must be addressed. The 401(k) plan's funds will be managed by a trustee responsible for making decisions following the plan's provisions. The 401(k) custodian makes no management choices.
