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What are the best small business 401k options?

I run a business with 8-10 employees, what are the best options for 401k plans?

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For a company that size, you would likely be better off with a SIMPLE IRA. The name implies the ease of set up and use as well as is an acronym for "Salary Incentive Match Plan for Employees."

The main cost is the employer is required to Match dollar for dollar 3% of annual compensation for three of every five years and can be as low as 1% of compensation in 2 out of every five years the match is only required for any employees who choose to participate there is no match required for those who choose not to participate.

The Set up and annual cost is only about $10 to $15 per participant per year, which the employer can have the employees pay. The cost you would pay for a 401(k) would go towards rewarding your employees instead of paying the admin fee. The only disadvantage is there is no vesting schedule in a SIMPLE plan. SO any employee who leaves the company is fully vested in the company matching contribution.

The cost of a 401(k) would usually be about $1500 to $2000 annually just to pay for the annual filing & discrimination testing. SIMPLE IRAs were created to avoid these fees and have the basic matching already built into the plan.

Jeff Babcock, CFP
My Benefit Package


Hi Emma - with 8-10 employees, have you looked into a PEO solution? I have clients that use ADP Total Source, Insperity, Extensis or TriNet and because it's a total solution, they have payroll, health benefits and pension coverage all available through the PEO. Usually that keeps costs down and gives the employees some good retirement investment options. Now, if you are on a growth trend, you may say that you are growing beyond the PEO cost structure and in that case you want to find an administrator who can handle the 401k for you at a reasonable cost and with the experience to make sure that no filing or regulatory issues arise. I'm sure you can find plans like this through Fidelity or Vanguard or find a trusted CFP who can help advise you on setup. I have one you can talk to if you'd like. Just PM me and I'll put you in touch. Hope this helps and good luck - let me know if I can help further. Rich V.


Given the fiduciary responsibilities and the work of administration (which is not just payroll) i.e. nondiscrimination reporting required with a 401k, my best suggestion is to use a solid financial firm or 401k specialist-provider. They can not only handle the investment aspects but can also provide you with good alternative ways of structuring enrollment to help ensure good participation.

I should have read all the answers before I hit Add. Being the Fiduciary is not something you can out source. Thank you Rosanna for the support of using specialist plan providers and advisors.


Just because your in a small firm it does mean that you can't establish a very comprehensive 401k plan. The plans I have installed have a preferred list of funds which have been selected by a specialist to comply with the demographics of your group.

You can also offer the following:
Individual brokerage accounts for the employees who wish to purchase stocks in their 401k plan. Low cost ETF's (Exchanged Traded Funds), as alternatives to mutual funds are available, as well.

There are no transactions cost and you elect to have a loan provision, hardship withdraw provision and in service withdraw provision. You can establish a plan with or without a match and have discretionary profit sharing
feature. I strongly suggest a match if you want to create an incentive for your employees.

You may elect to use various other plan designs to class benefits and reward the select people who have help you build your business. There are some of the many features and benefits that you can use to attract, recruit, retain and reward your employees.

The cost will surprise you. It is very affordable!

This is a great alternative if you are not interested in a PEO which can be expensive and require you to make some changes you are not interested in or are not applicable to your business. If you prefer the PEO for other benefits you can always elect to have the 401k on a stand alone basis outside of the PEO. You have more options that you may have believed you have.

John E. Stanojev, RFC
Capital Insurance & Investment Planning


A 401K is there to help your employees be prepared for retirement. There is a balance of expense, performance and administration time while there is a huge Department of Labor anvil sitting on your shoulders. We use some excellent partners for startup 401K plans and have work closely with many professionals and professional groups as the plan is the cornerstone for the owners plan as well. However, to answer BEST is difficult because the specifics of your situation are not known (its more than how many).

Also, I congratulate you for considering this step to benefit your employees.


Contact me at we specialize in low cost plans for small businesses like yours.


Just want to second what Jeff Babcock says, above. 401K plans come with startup and maintenance costs and administration that make them less attractive to smaller business owners, but you still want to have a retirement plan to attract, retain and motivate employees. A SIMPLE IRA is inexpensive to start and maintain, and it's a good basic retirement plan for your employees and yourself.

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