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Updated Jun 26, 2024

Best Business Employee Retirement Plans of 2024

Enhance your benefits package and invest in your employees' future with retirement plans from leading providers like Human Interest.

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Kimberlee Leonard, Senior Analyst & Expert on Business Operations
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A business.com editor verified this analysis to ensure it meets our standards for accuracy, expertise and integrity.
Best for Affordability
Human Interest
  • 401(k), 403(b), IRA
  • From $120/m + $5 per participant
  • 5% investment fee
USALinks to Human Interest
Visit Site
  • 401(k), 403(b), IRA
  • From $120/m + $5 per participant
  • 5% investment fee
Best All-in-One Solution
Paychex Retirement Services
  • 3 401(k) plan types + SIMPLE IRA
  • Plan fees on application
  • Investment fees on application
USALinks to Paychex Retirement Services
Visit Site
  • 3 401(k) plan types + SIMPLE IRA
  • Plan fees on application
  • Investment fees on application
Best for Small Businesses
ADP
ADP logo
  • Traditional 401(k) only
  • Plan fees on application
  • Up to 1% (min $20.83) monthly fee
USALinks to ADP
Visit Site
  • Traditional 401(k) only
  • Plan fees on application
  • Up to 1% (min $20.83) monthly fee
Best for Transparency
USA 401k
USA 401k logo
  • Traditional 401(k) + Safe Harbor 401(k)
  • $500 admin + $20 per participant
  • 8% annual fees (employee)
  • Traditional 401(k) + Safe Harbor 401(k)
  • $500 admin + $20 per participant
  • 8% annual fees (employee)
Best for Do-It-Yourself Solution
ShareBuilder 401k
  • Multiple 401(k) plans
  • From $95pm (employee fees POA)
  • Investment fees less than 1%
  • Multiple 401(k) plans
  • From $95pm (employee fees POA)
  • Investment fees less than 1%

Table of Contents

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At business.com, we strive to provide business owners with unparalleled recommendations for the best HR software and services, along with actionable advice for navigating human resources processes, fostering a healthy company culture and improving employee engagement. We infuse our playbooks and explainers with expertise from real HR advisers, payroll consultants, retirement planners and other human resources professionals.

Across our HR reviews and product guides, every solution we recommend — whether it be a payroll platform, PEO/HRO service or employee monitoring software — is thoroughly tested, investigated and vetted independently to ensure vendor claims about products are legitimate and backed by real user experiences. As part of our commitment to fairness and accuracy, each assessment is reviewed by a top business.com editor who was not involved in the analysis process. Learn more about our editorial process.

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How We Decided

When selecting the best employee retirement plans, we looked for providers who offer a variety of plan types, from traditional and Roth 401(k)s to SIMPLE and SEP IRAs. We took into account both the cost for employers and the administration and investment fees charged to employees. During our investigations, we also tried each vendor’s online platform used for enrolling in and managing retirement funds.

23

evaluated

10

researched

6

chosen

When selecting the best employee retirement plans, we looked for providers who offer a variety of plan types, from traditional and Roth 401(k)s to SIMPLE and SEP IRAs. We took into account both the cost for employers and the administration and investment fees charged to employees. During our investigations, we also tried each vendor’s online platform used for enrolling in and managing retirement funds.

23

evaluated

10

researched

6

chosen

Choosing the best employee retirement plan as part of your wider staff benefits package can be very time-consuming. Distinguishing between what’s on offer is difficult because of the complexity of many providers’ plans. But it’s essential you get the decision right so you give your firm the best chance of competing effectively for top employees. To help you select the best options, we’ve researched setup costs, prices for employers, plan types, investment fees and more to determine the best employee retirement plan providers for small business owners. Read on to learn about our recommendations and why we selected them.

Fidelity pension information

Many employment retirement plan providers allow employees to check on the state of their pensions online or via a mobile app (Source: Fidelity)

Compare Our Best Picks

BDC Ribbon
Our Top Picks for 2024
Human Interest
Paychex Retirement Services
USA 401k
ShareBuilder 401k
Fidelity Investments
Rating (Out of 10)9.39.39.39.29.19.2
Use case

Best for affordability

Best all-in-one solution

Best for small businesses

Best for transparency

Best do-it-yourself solution

Best for low fees

Plan options

401(k), 403(b), IRA

Traditional 401(k), Solo 401(k), SIMPLE IRA, Employer 401(k)

Traditional 401(k), individual 401(k), SIMPLE IRA, SEP IRA, safe harbor 401(k) and Roth 401(k)

Traditional 401(k), safe harbor 401(k)

Roth 401k, Safe Harbor 401k, Traditional 401k and Solo 401k

SEP IRA, SIMPLE IRA, self-employed 401(k), investment only retirement account, traditional 401(k)

Cost to employers

From $120 per month and $5 per participant per month

Contact for price

Contact for price

$500 company fee and $20 participant fee per annum

From $95 per month (employee fees – contact for price)

No account fees

Low investment fees

Investment advisory fee of 0.50% plus an average of 0.07% in fund fees

Not disclosed

Up to 0.1% (min $20.83 pm)

0.80%

Under 1%

Varies by fund

Online and mobile enrollment

Online only

Online only

Online only

Mobile enrollment only

Online only

Both

Transparent pricing

Yes

No

Yes

Yes

No

Yes

Setup and administration fees

Possible one-time $499 set-up fee

Not disclosed

None

None

Not disclosed

One-time $500 startup fee, $300 quarterly service fee, and $100 subscription fee

Review Link
Scroll Table

Additional Options Worth Exploring

Four other providers you may wish to consider that scored highly with our reviewers are:

Vanguard

Vanguard offers savers access to hundreds of mutual funds and ETFs with an average fund expense ratio at Vanguard is 0.08%. This is much lower than the industry average of 0.44%. We also like that they charge no trading fees either. The funds they offer tend to perform well over time (however, bear in mind that past performance is not a guarantee of future performance). Employers can offer their staff a wide variety of retirement savings plans, including a SEP IRA, individual 401(k), small business 401(k) and SIMPLE IRA. We also like the absence of a minimum investment requirement as that lowers the barrier to entry for SMBs. Last but not least, employers will find managing their accounts easy thanks to the intuitive dashboard on Vanguard’s site.

Fidelity

Fidelity’s simple account fees for its 401(k)s and IRAs stand out from its competitors – the provider charges $500 for setting up your account and $300 per quarter thereafter. Employees pay just 0.125% on their account balance and $25 for bookkeeping each quarter. Fidelity also doesn’t charge commissions when participants buy or sell U.S. stocks, bonds, mutual funds or ETFs. If you’re self-employed, the company offers SEP IRAs meaning you have access to one of the most cost-effective ways to save for your retirement.

We love how straightforward setting up an account on Vanguard is together with the extensive knowledge base on the providers site that helps your plan’s participants understand each type of investment in greater depth so they can determine which are right for them.

Shelton

From the start, Shelton assigns you a dedicated account manager so you feel supported at all times. Importantly, the firm stays with you after the plan has been set up and your account manager is there to assist you with your questions if any issues arise. We love Shelton’s live customer support. The team is there when you need them, unlike many other providers that operate ticketing systems where you have to wait for a reply. The volume of information on the firm’s website is impressive and it will help educate both you and your staff about the world of retirement savings and planning. The firm will even come to your workplace to speak to your staff, if you think that will help improve participation rates.

Perfect 401k

What stops many SMB owners setting up a retirement plan for their staff are concerns about how long the process will take. Of all the providers we reviewed, Perfect 401k is perfect for simplifying and fast tracking the process. From the outset, a dedicated implementation team is there to simplify the process for you. They’ll help you design the plan for your company and prepare enrollment materials to distribute to your staff. We love how much control staff have over their own plans – they can choose fully-managed, guided or self-directed accounts for themselves. For those that want to take more charge of their portfolio, they can choose from up to 20 low-cost mutual funds and even open an account with the broker Charles Schwab. All together, these factors should ensure higher levels of participation in your plan across the business.

Our Reviews

  • Base Price:From $120 per month and $5 per participant per month
  • Plan types:401(k), 403(b), IRA
  • Investment fees:Advisory fee of 0.50%, plus an average of 0.07% in fund fees
Editor's Rating: 9.3/10
Visit Site

Why Human Interest is Best for Affordability

A major issue for businesses of all sizes when finding the right employee retirement plans is sticking within a reasonable budget. Sometimes, employers defer the decision to offer a plan to their staff because of the high fees charged by plan providers. Although not the cheapest on the market, the service offered by Human Interest is, all things considered, the most affordable for company owners looking for a fully comprehensive yet cost-effective retirement solution for their employees.

Starting from $120 a month plus $4 per employee, employers benefit from a wide range of services ranging from integration with multiple leading payroll providers and flexible plan creation to automated plan administration and recordkeeping. We also love the low fees for employees – they charge an asset fee of 0.06% and a monthly average fund fee of 0.006% each month. This attractive overall fee structure results in reduced costs for employers now, and larger pensions for employees in the future.

Human Interest dashboard

You can manage your employees’ retirement benefit plans directly from Human Interest’s intuitive dashboard. (Source: Human Interest)

Human Interest Pricing

Plan Base monthly fee Fee per eligible employee per month Additional Features
Essentials $120 $5
  • No transaction fees for employees
  • Integrates with 500+ payroll systems
  • Customizable plans (auto-enroll, safe harbor, profit-sharing)
  • Employers can access Investment fiduciary services from a Human Interest advisor
Complete $160 $7 As Essentials plus:

  • Form 5500 filing with IRS
  • 3(16) administrative fiduciary services
  • ERISA bond procurement
Concierge $200 $9 As Complete plus: 

  • Continuous compliance monitoring
  • Employee mail notice management
  • Assistance with tax credit applications
  • Coverage for DOL audit expenses up to $50,000
  • Dedicated account manager
  • Direct collaboration with your CPA/auditor

Fees to your employees are 0.06% monthly asset fee cost (including advisory and recordkeeping fees) and 0.006% monthly average fund fees. You may be charged a one-time set-up fee of $499.

Human Interest Advantages

  • There are cheaper providers, but the bundle of services employers and employees receive for a low monthly fee is market-leading.
  • Human Interest connects to over 500 leading payroll providers, meaning you’re unlikely to need to switch to a new provider if you sign up.
  • Each plan offers automated portfolio management as well as access to a financial advisor who can give personalized investment advice for your employees.

Human Interest Disadvantages

  • Solo 401(k) plans are not available – this could be a problem for self-employed individuals wanting to use the service to maximize their retirement savings.
  • Access to a dedicated account manager is only available to higher tier subscribers – this could be an issue for business owners who need guidance with managing their plan.
  • There is a $499 account sign-up fee which, compared to other providers, is expensive. However, they may waive this upon request.

Human Interest user score

Human Interest’s clients rate its services highly online with the company scoring 7.7 out of 10 from over 200 reviews on Trustradius. Clients particularly liked the ease of enrolling employees into the service, compliance management, and the flexibility over retirement plans highly. One reviewer remarked that Human Interest has been “seamless to use with our payroll provider, and team members are able to navigate the site with ease.”

Click here for our full Human Interest review

  • Base Price: Contact for price
  • Plan types: Traditional 401(k), Solo 401(k), SIMPLE IRA, Employer 401(k)
  • Investment fees: Not provided
Editor's Rating: 9.3/10
Visit Site

Why Paychex Retirement Services is the Best All-in-One Solution

Having separate vendors looking after your payroll, general employee benefits plan and your retirement program adds layers of complexity to each, often leading to errors and inefficiencies. Paychex simplifies this greatly as they can manage all of these services for your firm under one roof.

From one intuitive dashboard, you can run and sync your payroll, benefits program, and retirement plan. We appreciate how easy Paychex makes this from the start, offering you access to their dedicated support team so that they’re on hand to make sure initial implementation of their system is smooth. You can tell the platform has been built with the user experience in mind, as all functions flow logically from each other and every feature is just one or two clicks away. We also really like the integration of the financial wellness service, FinFit, which helps employees manage their own money more responsibly and plan better for retirement. The mobile app is easy to use too, and it allows business owners and employees to manage their accounts on the go.

Paychex pension details

Employees can check their 401(k) and pension provisions by logging into Paychex. (Source: Paychex)

Paychex Retirement Services Pricing

Paychex does not publicly disclose its fees. Instead, you have to contact an advisor to arrange a tailored quote for your business.

Paychex Retirement Services Advantages

  • You can reduce the complexity of managing payroll, benefits administration and a retirement program by outsourcing it to one partner instead of multiple providers.
  • Your employees will appreciate how the FinFit app can help them manage their money better and retire with more.
  • The service Paychex provides is flexible and lets firms customize their employee retirement plans to fit the needs of their staff.

Paychex Retirement Services Disadvantages

  • The website interface is intuitive but it lacks the polish and smoothness of the dashboards provided by ShareBuilder401k and Human Interest.
  • Paychex requires you to contact one of its sales reps or affiliates to get a custom quote for their service.
  • The Better Business Bureau has awarded Paychex (the parent company) an A+. However, be aware that there have been over 170 complaints made to the bureau in the past year about the firm.

Paychex Retirement Services user score

On TrustRadius, Paychex scores 6.7 out of 10. Clients love the employee self service tools, how easy the dashboard is to use and the customer support offered by the firm.

Click here for our full Paychex Retirement Services review

ADP logo
  • Base Price: Custom quote
  • Plan types: Traditional 401(k), Individual 401(k), SIMPLE IRA, SEP IRA, Safe Harbor 401(k) and Roth 401(k)
  • Investment fees: Up to 0.1% subject to a minimum monthly fee of $20.83
Editor's Rating: 9.3/10
Visit Site

Why ADP is Best for Small Businesses

Many employee retirement plan providers are only interested in selling to larger clients and tailor their services and pricing structures accordingly. As a result, many SMBs owners struggle to find plans that fit within their budgetary constraints or offer the flexibility they need. ADP is a notable exception and it’s our choice as the best employee retirement service for small businesses.

We love how ADP offers such a wide range of retirement plans to employees including traditional 401(k), individual or solo 401(k), SIMPLE IRA, SEP IRA, safe harbor 401(k), and Roth 401(k). Just like with Paychex, we were impressed at how well their intuitive online platform integrates payroll and retirement plan services. The firm has clearly invested a lot of time and effort into its excellent mobile apps that make it easy for employees to enroll in the plan and manage their accounts. This simplicity could help employers to boost participation rates, a challenge for many SMBs. We should also note how ADP provides dedicated managers to assist companies with implementation and ongoing administration of the retirement plans. For SMB owners spinning many different plates and lacking  HR expertise, the support the ADP provides is excellent.

ADP 401k overview

Employees can drill down into their 401k and pensions on ADP. (Source: ADP)

ADP Pricing

ADP requires clients to get in touch with them for a tailored quote.

They offer the following three service levels on their 401k packages:

Plan Number of employees Features
ADP 401k Essential 1-49
  • Simplified plan administration
  • Real-time payroll integration with ADP Smartsync®
  • 3(16) administrative fiduciary and 3(38) investment management services
  • Financial wellness tools
  • Auto-enrollment
  • Award-winning ADP Mobile App
ADP 401k Enhanced 50-99 As Essential plus:

  • Customizable plan design and investment options with no proprietary funds required
  • Streamlined compliance process
  • Access to an expert service team, TPAs and 3(16) fiduciary services
  • 3(21) and 3(38) investment management services available
  • Personalized insights based on extensive employee data
ADP 401k Premium 100+ As Enhanced plus:

  • Dedicated client service manager for to administer your plan
  • Personalized guidance from a relationship manager
  • Support for mergers, acquisitions and spin-offs with an ERISA consultant
  • Employee communication program managed by a dedicated retirement communication manager
  • Educational resources including webcasts, microsites, and videos
  • Fully integrated HCM platform
  • Specialized support for private equity firms and profit-sharing plans

ADP charges employers a monthly investment service fee of 0.10% of covered assets subject to a minimum $20.83. You may be able to offset the costs of setting up, administering and contributing to the plan but this depends on the plan you choose and the number of employees enrolled.

ADP Advantages

  • The range of retirement plans available to employees is one of the broadest for a vendor that’s focused on servicing smaller businesses.
  • For small business owners inexperienced with HR or pension plan management, having a support team available at implementation and beyond is very helpful.
  • The mobile app is particularly well executed, which may lead to much greater participation in your program.

ADP Disadvantages

  • ADP doesn’t list prices on its website and requires that you make contact with one of their sales reps. This complicates the process of comparing and contrasting competing quotes.
  • The company receives many glowing reviews online from customers. However, the tone of the bad reviews suggests that the company sometimes poorly mishandles situations.
  • Although accredited by the Better Business Bureau to A+, there have been nearly 350 complaints about the firm in the past 12 months.

ADP user score

ADP scores highly on TrustRadius with a score of 7.9 out of 10 for its Workforce Now package which allows employees and employers to manage retirement plans. One reviewer commented that “adjusting retirement strategies is simple and easy” while another noted that their firm now uses “ADP Workforce Now from recruiting to retirement”

Click here for our full ADP review

USA 401k logo
  • Base Price:$500 employer admin fee and $20 participant fee per year.
  • Plan types:Safe Harbor 401(k) and traditional 401(k).
  • Investment fees:Employees pay annual account fee of 0.8%.
Editor's Rating: 9.2/10

Why USA 401k is Best for Transparency

We love that USA 401k provides clear pricing information to potential customers upfront, saving them the time they’d otherwise spend gathering quotes.  USA 401k make its fee structure as flat and predictable as possible. For example, unlike many other providers we researched, the USA 401k does not charge 12b-1, exchange or minimum-balance fees. With both its new and existing 401k plan, employers pay an annual fee of $500 plus $20 per participant – employees pay just 0.8% a year. We love how no matter how small the total of your employee’s investment, they get access to 15,000 funds and 1,000 exchange-traded funds. We also appreciate the concierge-level service given to employers when they set up their service, with help even extending to payroll integration and assistance with reporting and compliance.

USA 401k Pricing

USA 401k offers one service plan, priced at $500 per year for your company and $20 per year per program participant. Its services are aimed at companies with less than 1,000 employees.

For that, you receive:

  • Payroll integration and contribution processing
  • Loans, participant tax, rollovers, distributions and hardship withdrawals reporting
  • Profit sharing
  • Concierge-style support from implementation and beyond
  • DOL compliance, tax reporting and year-end testing

Employees benefit from enrollment support (including on-site seminars and mobile enrollment), personalized assistance and access to a range of resources and tools including retirement income calculators and reports from Morningstar.

USA 401k Advantages

  • We really like how transparent USA 401k is in its pricing and the comprehensive range of services and support you’re provided with.
  • The investment and risk appetite requirements of all participants is very well covered through access to more than 15,000 mutual funds and ETFs.
  • There is no tiering of services – smaller employers don’t have to pay extra to access additional features.

USA401k Disadvantages

  • There is no online registration to set up a plan. You have to contact the company or one of its authorized advisory services or agents to get started.
  • Employees can choose from a variety of pre-selected investment options in their 401k plan, such as mutual funds and ETFs. However, they cannot change the underlying details or structure of those chosen investment options.
  • We like that employees can enroll via their mobile phone, however we were disappointed that there is no mobile app that employers and participants can keep track of their plans with.

Click here for our full USA401k review

  • Base Price: From $95 per month (employee fees – contact for price)
  • Plan types: Roth 401k, Safe Harbor 401k, Traditional 401k and Solo 401k
  • Investment fees: Unspecified but less than 1%
Editor's Rating: 9.1/10

Why Sharebuilder 401k is the Best Do-It-Yourself Solution

Many business owners just want to be able to quickly and easily set up a retirement plan for their employees themselves. They don’t necessarily want to speak with an investment advisor, but want an automated process that offers compliance and value-for-money. If this is what you’re looking for, the best-executed do-it-yourself solution we reviewed is Sharebuilder 401k.

The company has digitized every step of setting up a new plan and has automated all associated paperwork and administration. When set up, employees can choose from an impressive range of 22 index funds and six model portfolios to emulate. We love how the platform makes it easy for employees to manage their plan and check on their savings at any time. The ShareBuilder 401k business model also keeps costs down and, as you can see from their fees below, they pass these savings onto their customers.

Sharebuilder 401k Pricing

Sharebuilder 401k offers the following three subscription levels:

Plan Type Monthly Cost Key Features
Secure Haven 401(k) From $95
  • Instant vesting
  • Obligatory match, ensuring IRS compliance
  • Profit sharing available
Classic 401(k) From $110 Everything in Secure Haven 401(k) plus:

  • Flexible matching options, including vesting schedules
Graduated Profit-Sharing 401(k) From $190 Everything in Classic 401(k) plus:

  • Combinable with Secure Haven or Classic matching
  • Customizable profit sharing for employees

Every service plan has the following features:

  • Automated onboarding with pre-selected investment allocation
  • Comprehensive investment oversight, including ERISA 3(38) coverage
  • Diverse investments to choose from: 22 index funds, 1 money market, and 6 model portfolios
  • Choice between Roth 401(k) and traditional tax-deferred contributions
  • Automatic price discounts
  • Comprehensive educational materials: webinars, guides, videos, and calculators
  • Form 5500 prepared for easy completion
  • Loan and hardship withdrawal options for participants
  • Dedicated 401(k) advisors and customer support
  • Plan compliance
  • Streamlined digital year-end checklist

Sharebuilder 401k Advantages

  • The ShareBuilder 401k process for setting up an account is automated and easy to follow. This is true even for business owners with little or no HR or pension plan management experience.
  • The platform offers a wide range of investment options and account types, and promises never to charge 1% or more in investment fees.
  • If your company’s pension assets exceed $5 million, ShareBuilder 401k waives their administration fees completely.

Sharebuilder 401k Disadvantages

  • The company does not offer any IRA options, which may deter individuals who want more flexible retirement savings options.
  • The website only lists starting prices, so hard to know what your true cost will be.
  • Unlike most other providers, the company does not offer a mobile app.

Click here for our full Sharebuilder401k review

  • Fidelity doesn’t have any opening or closing costs or an annual fee. With United States stocks, ETFs and options, Fidelity does not charge a commission for trades.
  • You can open up a Fidelity SEP IRA in minutes from its website or mobile app.
  • Through no fault of Fidelity, employees can’t save in a SEP IRA; you have to do the investing for them. As a result, this plan is better suited for solo business owners.
Editor's Rating: 9.2/10

Small business owners know that they need to offer a retirement plan, but not everyone participates in the plan. One way to increase participation is to keep investment fees low. Fidelity doesn’t have account fees and allows participants to get started with no minimum investment required. There are also no commissions paid when buying or selling U.S. stocks and ETFs. This is why Fidelity gets the spot of the best retirement plan for low fees.

One of the more popular plans with Fidelity is a SEP IRA, which is a desirable option for self-employed individuals and small business owners with only a handful of employees. SEP IRAs are easy to set up, have higher contribution limits than traditional IRAs and offer many government tax breaks. These plans are cheap to begin with, but when you work with Fidelity, they’re even more affordable, which is why it’s our choice as the best retirement plan provider for self-employed workers.

Fidelity also gives a self-employed individual the ability to open a solo 401(k) account. As with SEP IRA plans, a solo 401(k) account gives self-employed people the same tax-deferred growth as traditional employee retirement plans. And just as with a traditional 401(k), self-employed people with solo accounts can invest in mutual funds, stocks, ETFs and more.

We also like how Fidelity makes it easy to open a SEP IRA online and through its app. You can open an account in just a few minutes. Fidelity doesn’t abandon you once you start investing, which is another attribute that appealed to us. It has a wealth of information online to guide your investment decisions. It doesn’t hurt that Fidelity has been in the retirement savings industry for decades and earned a stellar reputation in that time. Self-employed workers need to save for retirement too, which is where a SEP IRA comes in. By working with Fidelity, you get a low-cost option and a variety of investment choices.

Employee Retirement Plan Pricing

When you’re evaluating how much an employee retirement plan costs, you need to consider two sets of prices: your costs to sponsor the plan and your employees’ costs to participate in it. These costs vary by type of plan and provider. There are also tax incentives associated with some of these plans, which can lower your overall expenditures.

Tax Advantages of Offering Employee Retirement Plans

The government offers tax incentives to small businesses that sponsor retirement plans for their employees. As you calculate what it would cost to sponsor an employee retirement plan for your business, consult your accountant or tax advisor to determine which tax credits and deductions you’re eligible for and how they would affect your tax strategy:

  • Eligible employers can claim a tax credit of up to $5,000 for three years for the costs associated with starting a SEP IRA, SIMPLE IRA or 401(k) plan. A tax credit reduces the taxes you owe on a dollar-for-dollar basis.
  • The contributions you make to your employees’ plans are tax-deductible.
  • Contributing to and participating in a retirement plan may lower your income tax bracket.

401(k) Plan Costs

A 401(k) plan used to be rare for small employers to offer, given the costs and complexity of complying with federal regulations. You needed a plan administrator, custodian, recordkeeper and financial advisor. Each of these parties charge fees; some are fixed while others are based on plan assets. Some companies offer multiple in-house services but charge extra for some of them. Sounds confusing? We think so too.

In our opinion, hiring multiple companies to handle different aspects of the same overall task is burdensome and expensive, so in our search for the best retirement companies, we looked for all-inclusive 401(k) providers that cater to small businesses. They handle all the duties of an administrator, recordkeeper, custodian and advisor, so you only need to work with one company. They also act as an ERISA 3(38) fiduciary, which lowers your liability risks. Some of these companies use robo-advisors that rely on algorithms to manage assets, allowing them to forgo fund management or advisory fees, so you only pay the fund expense ratio. Most of these companies offer low-fee index funds, ETFs, target-date funds and mutual funds to keep expense ratios down. Here’s an overview of the fees you can expect to pay:

  • Setup or establishment fee:Most retirement plan companies charge around $500 to set up your plan, but some offer discounts or promotions that reduce or waive this fee. If you’re converting an existing plan, this fee is often higher.
  • Monthly or annual administration fee: Most retirement services charge this fee, which can run the gamut from $50 to $130 per month, sometimes even higher. Some of the vendors we reviewed charge this fee quarterly.
  • Monthly or annual cost per employee:This fee is sometimes included in the monthly administration fee. For those that charge it separately, the average price is around $6 per employee per month. Usually, the employer pays this fee, but sometimes the employee (plan participant) pays it.
  • Investment, advisory, custodian or other asset-based fees:Most companies charge some sort of asset-based fee that the plan participant pays. It ranges from fund expense ratios that cost around 0.06% to 0.1% for index-based funds to advisory services that cost up to 0.75% annually. All told, the average investment fees for 401(k) plans are around 1.65%.
  • Termination fee:Every provider charges this fee, which is usually around $1,000, if you terminate your plan, although a few companies charge less. Shutting down a plan and transferring assets is more involved on their end than setting up a plan.
  • Nonstandard or event-based fees:If plan participants take out loans from their 401(k) plans or reach the age where they’re required to take minimum distributions, they’ll pay various related fees, such as loan origination and loan maintenance fees.
  • ERISA bond (also called a fidelity bond):Small business 401(k) plan providers don’t offer this, but you’ll be required to have it when you sponsor an employee retirement plan. You should be able to get it from top liability insurance providers or your retirement services provider can recommend a source.
TipBottom line

Make sure you know all the costs of your plan before you sign on the dotted line. It can be complicated and costly to exit an employee retirement plan, so you want to make a well-informed choice.

IRA Plan Costs

Employer-sponsored IRAs are much simpler to set up and maintain than 401(k) plans, but they don’t allow employees to set aside as much money in their workplace retirement plans. IRAs have a very different pricing structure from 401(k) plans, and there’s a lot of variance between brokerages. Here’s a sample of the fees you should look out for when setting up this type of employee retirement plan:

  • Setup fee: Most brokerages don’t charge a fee to set up an IRA retirement plan.
  • Account minimums:Some brokerages have a minimum investment threshold that you must meet to establish an account, but many don’t.
  • Account service fees:Some brokerages charge an annual fee for each fund if your balance doesn’t meet a certain threshold. Waivers may be available.
  • Investment trade fees: Plan participants pay this fee, or commission, when they trade shares. There’s a lot of variance for this fee, depending on the brokerage you use and the funds you trade. Advertised fees for ETFs that you trade online range from $4.95 to $19.95. However, if plan participants trade over the phone or have a broker place the trade for them, this fee is higher. Participants can save money on this fee by choosing from the commission-free trades that many brokerage firms offer.
  • Advisor services (optional):Brokerages frequently offer management services for an extra fee. Usually, this fee is a fraction of a percentage of the account balance, but some cost more than 1% of your assets. You may be required to meet account minimums to qualify for this service. However, most brokerages, even those that offer this service, provide complimentary access to brokers who can give your plan participants custom investment advice, helping them select funds and create a sound investment strategy.
  • Nonstandard or event-based fees:As with 401(k) plans, participants may pay various fees for actions like withdrawing or transferring money out of their retirement accounts.
FYIDid you know

When you’re shopping for an employee retirement savings plan, the more you know about the costs and features upfront, the better. That’s why we scoured the plan providers out there to find the ones that are transparent and forthcoming about the fees they charge and the services they provide.

Employee Retirement Plan Comparison

In our search for companies with the best employee retirement plans, we knew we wanted to find providers that serve small businesses and offer quality plans that are affordable for both business owners and employees. We also wanted the plans to be easy to set up and manage. To this end, we looked for retirement services with the following features:

  • Services for small and very small businesses:Not every employee retirement plan provider works with small businesses. Some require you to have thousands or even millions of dollars in fund assets. We looked for services that work with companies that have just a few employees and don’t yet have any plan assets.
  • Fiduciary responsibility, where applicable:Small business 401(k) plans have strict federal regulations, so we looked for retirement plan companies that do the heavy lifting for you and provide plan administration, recordkeeping and advisory services as part of their offering and standard cost.
  • Pricing posted on the company’s website:This makes it easy for you to determine whether a plan is within your budget and saves you the time of calling the company for this information.
  • Competitive costs:We know that price is one of your top concerns about sponsoring a plan, so we looked for plans that have relatively low costs and few fees while still delivering a quality retirement product.
  • Patient customer service:Many small business owners haven’t been plan sponsors before, and there’s a lot to learn before offering a workplace retirement plan. For this reason, we included customer service in our testing.

Types of Retirement Plans: 401(k) and IRA

There are several types of 401(k) and IRA employee retirement plans that you can sponsor for your small business. Your accountant or tax advisor can help you decide which is the best option for your small business, based on your financial situation, number of employees and personal retirement goals.

401(k) Plans

This is the most popular type of employee retirement plan because it has higher contribution limits for employees and offers a choice of pretax or Roth contributions. Plan varieties include traditional 401(k), safe harbor 401(k) and individual 401(k).

IRA Plans

These plans usually have lower contribution limits than 401(k) plans but are also easier and less expensive to set up and maintain. Most brokerages offer both employer-sponsored IRAs and personal IRAs that can supplement workplace-sponsored retirement plans. Plan varieties include traditional and Roth IRAs, SIMPLE IRAs and SEP IRAs.

Bottom LineBottom line

For small business owners, 401(k) plans and IRAs are two popular choices. A 401(k) plan is best suited for a business owner who wants to max out their contributions, while IRAs are less complicated and easier to start.

How To Choose a Retirement Plan

Here we’ve listed some factors that may help you identify the type of retirement plans for small businesses that you want to learn more about. Before choosing a plan, be sure to consult your financial planner and tax advisor for advice specific to your business needs.

1. Employee Status

Consider the following plan types if you have employees and … 

  • Want to make Roth contributions: 401(k) and Safe Harbor 401(k)
  • Want to make higher contributions for yourself (and key employees, if applicable): Safe Harbor 401(k)
  • Prefer not to match or make contributions to employee accounts: Traditional 401(k)
  • Want a basic plan that allows employees to contribute: SIMPLE IRA
  • Want a plan that doesn’t require yearly contributions: SEP IRA

Check out these plan types if you don’t have employees and …

  • Want a retirement plan that anyone can set up: Traditional and Roth IRA
  • Want to maximize savings by contributing to your retirement plan as both an employer and employee: Individual 401(k)
  • Want to maximize savings, but only want to make contributions as an employer: SEP IRA

2. Fund Options

When choosing a retirement plan, you want to make sure that the plan offers investment options that satisfy your (and your employees’) investment objectives. There should be a range of managed portfolios for those who don’t want to actively manage their retirement plan to individual investment options for those that want to take an active role in managing their retirement plan.

3. Cost

Establishing a retirement plan should not break the bank. Plans may have setup fees, monthly administration costs and per-employee costs. Make sure that you choose a plan that fits into the budget of your company. Offering a retirement plan is a perk that shouldn’t break the bank.

4. Customer Service

Retirement plans can be confusing and there is a lot at stake in regard to penalties if you do something wrong. Choose a provider that walks you through the plan and compliance issues so that all of the details are addressed appropriately. Good customer service and support is paramount to starting a retirement plan when you’ve never had one before.

Traditional 401(k) Plan

This plan doesn’t require employers to match employee contributions, but those who do can set a vesting schedule that encourages employees to stay with the company.

Costs of Traditional 401(k)

For this plan, charges often include a one-time setup fee, monthly or annual administrative and per-employee fees and investment or advisory fees.

Pros of Traditional 401(k)

  • Employers are not required to match participant contributions.
  • Employer contributions are tax-deductible as a business expense.
  • Employers may set a vesting schedule to encourage employee retention.
  • The contribution limits for employees are higher.
  • Employees can elect to make salary deferrals or after-tax contributions.
  • Contributing participants may qualify for the saver’s credit on their income tax returns.
  • Loans are available to plan participants.

Cons of Traditional 401(k)

  • The plan can be complex to set up and administer.
  • It requires employers to file IRS Form 5500 (Annual Return/Report of Employee Benefit Plan).
  • It requires annual nondiscrimination testing by the IRS to make sure the plan doesn’t favor highly compensated employees.

Contribution Limits and Matching Requirements for Traditional 401(k)

This plan allows optional contributions from both employees and employers. Employees’ elective deferrals for 2023 are capped at $22,500, though catch-up contributions up to $7,500 are allowed for employees age 50 and over. Employee contributions are 100% vested.

As an employer, you aren’t required to offer matching contributions for this plan, but if you do, you have the option to set a vesting schedule for your contributions. You may contribute up to 100% of compensation for eligible employees. The total contribution limit for 2023, including both employee and employer 401(k) contributions, is $66,000. However, this plan is subject to nondiscrimination testing, which may require you and highly compensated employees to reduce your contributions.

Rules and Deadlines for Traditional 401(k)

This plan can be established up to the last day of the initial plan year (usually December 31). Typically, this type of plan is available to all employees ages 21 and over who worked 1,000 hours or more in the last year. Participants can make withdrawals from this plan without penalty after age 59.5. Required minimum distributions (RMDs) begin the year the participant turns 70.5 years of age.

Safe Harbor 401(k) Plan

Many small business owners favor this type of plan because it allows them and their key employees to maximize their own retirement contributions.

Costs of Safe Harbor 401(k)

This type of plan often has a setup fee, administrative fees, per-participant fees and an investment or advisory fee.

Pros of Safe Harbor 401(k)

  • Employer contributions are tax-deductible as a business expense.
  • It doesn’t require annual nondiscrimination testing.
  • It has higher contribution limits for employees.
  • Employees may defer salary or make Roth contributions.
  • Contributing participants may qualify for the saver’s credit on their income tax returns.
  • Loans are available to plan participants.

Cons of Safe Harbor 401(k)

  • It can be complex to set up and administer.
  • It requires employers to file IRS Form 5500.
  • The employer must match or contribute to employee accounts.
  • It doesn’t allow employers to set a vesting schedule.

Contribution Limits and Matching Requirements for Safe Harbor 401(k) Employee contribution limits for 2024 are $23,000, up from $22,500 in 2023. Catch-up contributions of up to $7,500 are allowed for employees age 50 and over. Employee contributions are 100% vested.

Employer contributions are required for safe harbor 401(k) plans. As the employer, you must match either 4% for participating employees or 3% for all eligible employees and these contributions are immediately 100% vested. However, this plan type doesn’t require nondiscrimination testing, so you and your highly compensated employees can maximize your contributions. As an employer, you may contribute up to 25% of compensation. The total contribution limit for 2024 (including both employee and employer contributions) is $69,000, up from $66,000 in 2023.

Rules and Deadlines for Safe Harbor 401(k)

The establishment deadline for safe harbor 401(k) plans is Oct. 1. This plan is usually available to all employees age 21 and older who worked 1,000 hours or more in the last year. Participants may withdraw funds without penalty after age 59.5 but must begin withdrawing funds when they turn 70.5 years of age to avoid being penalized with a 50% tax on the RMD.

Individual 401(k) Plan

This type of plan, also called a solo 401(k), is best for high-earning, self-employed individuals with no employees (apart from a spouse) who want to invest as much as they can into their retirement plans. It allows a sole proprietor to contribute as both employee and employer.

Fidelity dashboard

Employee dashboard showing participation rates, balances and more in real time (Source: Fidelity)

Costs of Individual 401(k)

The fees for this type of plan vary by provider. Some have a setup fee, monthly or annual administrative fee and investment or advisory fee. Others don’t charge a setup fee but have ETF and mutual fund expense ratios and charge for fund trades or have annual fund service fees (though these may be waived, depending on your account balance). Some also require a minimum opening deposit.

Pros of Individual 401(k)

  • Contributions are tax-deductible as a business expense.
  • There is a Roth (after-tax) option for contributions.
  • The contribution limits are high.
  • No nondiscrimination testing is required.

Cons of Individual 401(k)

  • It can be complex to set up.
  • No loans are available from this type of plan.
  • It requires you to file IRS Form 5500-EZ or 5500-SF when your account has more than $250,000 in assets.

Contribution Limits for Individual 401(k) Contribution limits for 2024 are $23,000, plus a catch-up contribution of $7,500 for individuals age 50 and over.

Rules and Deadlines for Individual 401(k)

Individual 401(k) plans must be established by December 31 or the end of the fiscal year. This plan type is only available to self-employed individuals with no employees (with the exception of a spouse who works for the business). As with nearly every retirement plan, you must be age 59.5 to withdraw funds without a tax penalty, and you must begin withdrawing funds at age 70.5 to avoid an expensive RMD tax penalty.

Traditional and Roth IRAs

These aren’t workplace-sponsored retirement plans. Traditional and Roth IRAs are designed for individuals and can be used in addition to workplace-sponsored retirement plans.

Costs of Traditional and Roth IRAs

Usually, there are no setup or administrative fees for the plan sponsor, but participants pay trading fees and fund expense ratios.

Pros of Traditional and Roth IRAs

  • There are no setup or administrative costs.
  • It’s easy to set up and maintain; it doesn’t require tax filing or compliance testing.
  • Roth IRA funds grow tax-free and have no RMD.
  • Traditional IRA contributions may be tax-deductible if you don’t have a workplace-sponsored retirement account or if your modified adjusted gross income doesn’t exceed certain limits.
  • It accepts rollovers from other retirement plans.
  • Contributing participants may qualify for the saver’s credit on their income tax returns.

Cons of Traditional and Roth IRAs

  • Both traditional and Roth IRAs have low annual contribution limits.
  • Only one rollover per year is allowed (though there are some exceptions to this rule).
  • No loans are available from this type of plan.

Contribution Limits for Traditional and Roth IRAs

Whether you have a traditional or Roth IRA, the contribution limit for 2024 is $7,000, up from $6,500 in 2023. A catch-up contribution of $1,000 is allowed if you’re 50 or older.

Rules and Deadlines for Traditional IRAs

Traditional IRAs can be opened at any time, but contributions for the year must be made by the deadline for filing your tax return (typically April 15 without extensions).

Individuals with earned income above $7,000 ― or $8,000 for those over age 50 ― can contribute to a traditional IRA. However, there is an age limit for this type of account ― those who are 70.5 by the end of the year may not open a traditional IRA. You can withdraw funds without penalty after age 59.5 and must begin withdrawing funds the year you turn 70.5 to avoid a 50% RMD excise tax. There are certain exceptions to the early withdrawal penalty, such as paying unreimbursed medical expenses or qualified higher education expenses.

Rules and Deadlines for Roth IRAs

Like traditional IRAs, Roth IRAs can be opened at any time, but annual contributions must be made by the tax filing deadline (April 15). There are some restrictions on the Roth IRA for high-income individuals, but there isn’t an age limit. You must be 59.5 to withdraw funds from your IRA without paying an additional 10% tax on investment earnings. Also, Roth IRAs must be held a minimum of five years before you can withdraw funds. Unlike with most retirement accounts, you aren’t required to withdraw funds as long as you live. After you die, your beneficiaries must begin withdrawing funds to avoid RMD fines.

SEP IRA

Simplified Employee Pension plans, or SEP IRAs, can be set up by self-employed individuals as well as business owners with employees.

Costs of SEP IRA

There often isn’t a setup fee for this plan. There may be administrative or service fees, though they may be waivable. Participants pay trading fees and fund expense ratios. Optional advisor services may be available for an extra fee.

Pros of SEP IRA

  • Setup and administrative costs are low.
  • It’s easy to set up and maintain; it doesn’t require tax filing or compliance testing.
  • Employer contributions are tax-deductible as a business expense.
  • Employers don’t have to contribute to this plan every year.

Cons of SEP IRA

  • Employers must contribute the same percentage of compensation for every participant.
  • Employer contributions have immediate 100% vesting.
  • Employees cannot contribute to this plan.
  • No loans are available from this type of plan.

Contribution Limits and Matching Requirements for SEP IRA

This plan allows optional contributions from both employees and employers. Employees’ elective deferrals for 2024 are capped at $23,000, though catch-up contributions up to $7,500 are allowed for employees age 50 and over. Employee contributions are 100% vested.

As an employer, you aren’t required to offer matching contributions for this plan, but if you do, you have the option to set a vesting schedule for your contributions. You may contribute up to 100% of compensation for eligible employees. The total contribution limit for 2024, including both employee and employer 401(k) contributions, is $69,000, up from $66,000 in 2023. However, this plan is subject to nondiscrimination testing, which may require you and highly compensated employees to reduce your contributions.

Rules and Deadlines for SEP IRA

Although SEP IRAs are often considered a retirement plan option for small businesses, there’s no limit on the size of business that can offer them. SEP IRAs must be established by your business’s tax filing deadline (usually April 15 unless you’ve filed an extension). All your employees who are 21 or older, have worked for you for at least three out of the last five years and have earned at least $600 during the year are eligible to participate in this plan. Participants may withdraw funds without penalty after age 59.5 but must begin withdrawals the year they turn 70.5 to avoid a hefty RMD tax.

Bottom LineBottom line

Options abound for small business owners looking to offer employees access to a retirement savings plan. Which one is right for you and your staff depends on how many employees you want the plan to cover, whether you want a matching component and how simple or complex you want it to be.

SIMPLE IRA

A Savings Incentive Match PLan for Employees, also known as a SIMPLE IRA, can be set up by self-employed individuals and small business owners with 100 or fewer employees.

Costs of SIMPLE IRA

This plan usually has no setup fee and few administrative costs (some may be waivable). Participants pay trading fees and fund expense ratios. Optional advisor services may be available for an extra fee.

Pros of SIMPLE IRA

  • It’s easy to set up and maintain; it doesn’t require IRS 5500 tax filing or nondiscrimination testing.
  • Employer contributions are flexible.
  • Employer contributions are tax-deductible as a business expense.
  • As with individual 401(k) plans, self-employed individuals with no employees can contribute to this plan as both employee and employer.
  • Contributing participants may qualify for the saver’s credit on their income tax returns.

Cons of SIMPLE IRA

  • Employers must match or contribute to employee accounts.
  • Employer contributions are immediately 100% vested.
  • Contribution limits are lower than with other types of workplace-sponsored retirement plans.
  • No loans are available from this type of plan.

Contribution Limits and Matching Requirements for SIMPLE IRA

Employers are required to match or contribute to employee accounts. Employee contributions are optional.

Employees may contribute up to $16,000 in 2024, up from $15,500 in 2023. Those age 50 and over may also make catch-up contributions of $3,500.

Employers must make contributions for all eligible employees, using the same salary percentage. For 2024, the contribution limit is the lesser of 25% of the employee’s compensation, or $69,000. Contributions are 100% vested.

Rules and Deadlines for SIMPLE IRA

SIMPLE IRAs must be established by October 1. All employees for whom you have paid at least $5,000 during previous years or expect to pay this year are eligible to participate in this type of plan. Plan participants may begin withdrawing funds at age 59.5 without paying a 10% additional tax. However, participants must hold the account for at least two years before making withdrawals to avoid a higher 25% additional tax. Participants must begin withdrawals the year they turn 70.5 to avoid a 50% RMD excise tax.

Retirement Plan FAQs

Sponsoring a retirement plan for employees is a big step for a small business. Here are four considerations that can help you determine whether offering a retirement plan is a good strategy for your business.

1. It helps you attract and retain talent.

As the country enjoys low unemployment rates and skilled workers are in high demand, offering a retirement plan as part of your benefits package helps you compete against larger companies to attract and keep top talent. In fact, companies that don’t offer retirement plans are shrinking in number. A 2023 Callan survey on retirement plan trends reported that 81 percent of respondents now offer a 401(k) plan.

2. It gives you tax advantages.

If you haven’t offered a retirement plan before and have fewer than 100 employees, you may be eligible for the Retirement Plans Startup Costs Tax Credit. For the first three years of your plan, you’re credited up to 50% of plan startup and administration costs, up to $500 per year. If you match your employees’ contributions, your contributions are tax-deductible. You may also be able to lower your personal income tax bracket by participating in the plan. You should consult your certified public accountant (CPA) or tax advisor about the tax implications for your business as well as your personal finances.

Upcoming federal legislation may offer additional tax credits to small businesses that automatically enroll their employees in a retirement plan. It may ease other regulations as well, making it easier for small business owners to offer this benefit to their employees.

3. It helps you save for your own retirement.

You’re allowed to participate in the plan you sponsor, and you’ll be able to save more money for retirement than if you set up a traditional or Roth IRA. Many small business owners choose the safe harbor 401(k) because it allows them to max out their own retirement contributions when they match or contribute to employee accounts. Again, you should ask your CPA or financial advisor how you can maximize your retirement savings under the plan you select for your business.

4. Your state may require it.

Some states have passed, or are in the process of passing, legislation that requires businesses to either provide retirement plans for their employees or register with the state and allow their employees to participate in a state-sponsored plan. Employers choosing the latter would be required to submit employee payroll contributions to the state, but as of this writing, they wouldn’t be required (or allowed) to contribute to employee plans. They would, however, face penalties for noncompliance. They also wouldn’t receive the tax credits for sponsoring a plan of their own.

California, Illinois and Oregon have already begun implementing such legislation in phases, starting with larger businesses. Small businesses will also be subject to this legislation. As of June 2022, California now requires businesses with five or more employees to enroll in CalSavers, a state-sponsored retirement savings program. In this case, employers don’t pay fees and have minimal responsibility. However, failure to allow employees to participate can result in a fine of up to $750 per employee.

Connecticut, Maryland and Massachusetts have passed legislation to form state-run plans. New Jersey and Washington plan to offer online marketplaces where small business owners can shop for retirement plans for their businesses.

Costs depend on how many employees participate in the plan, the type of plan you choose and the retirement plan company (or companies) that help you run the plan. You should also consider whether you will match or contribute to your employees’ IRA or 401(k) accounts.

For 2023, employees can contribute up to $22,500. Employees age 50 and older can make an additional $7,500 catch-up contribution. Employers’ contributions cannot exceed 25% of an employee’s compensation. For 2023, employees and employers can contribute a total of $66,000.

Note that this differs for small business owners with no employees other than a spouse. Sole practitioners can set up a self-employed 401(k) with a $22,500 annual contribution limit as of 2023. Similar to businesses with multiple employees, the total employee and employer contributions cannot exceed $66,000.

You should approach setting up a 401(k) the same way you would implement health insurance or other benefits for your employees. That means conducting research, figuring out what your employees want and making decisions based on your due diligence. Once you settle on a retirement service provider, you have to choose the plan that works for your business, budget and employees’ needs.

Armed with your research, you next have to create a plan document that meets IRS requirements and details the important aspects of the plan. You also have to choose a trustee to handle the plan’s contributions, plan investments and distributions. Under IRS rules, the plan’s assets must be held in trust to ensure funds are used to benefit plan participants and their beneficiaries. It’s also important to keep detailed records of your employees’ contributions and the current performance and value of the plan. You can outsource those tasks to a 401(k) recordkeeper if you don’t hire a provider that does it all for you.

It’s also incumbent on you as the employer to provide information about the plan to your participants, such as alerting them to any investment changes or if fees are raised or lowered.

Small business owners have many options for retirement plans to offer employees. The two main types are 401(k) plans and IRA, each with various options and subtypes.

A 401(k) is the most popular type of retirement plan for employers to offer by far. It’s attractive because of its high contribution limits for employees and choice of pretax or Roth contributions. Business owners can choose a traditional 401(k), a safe harbor 401(k) or an individual 401(k) plan.

IRA plans are easier and cheaper to set up and maintain, but they have lower contribution limits for employees than a 401(k) plan. There are Roth IRAs, SIMPLE IRAs and SEP IRAs. Employees can access employer-sponsored IRAs and personal IRAs to supplement workplace-sponsored retirement plans.

Since the SECURE Act of 2019, small businesses can join with other businesses to participate in a 401(k) plan. A pooled employer plan (PEP) is designed to lower the cost of offering an employee retirement plan and get more businesses to offer it to their workforces. The PEP is administered by the plan provider, which serves as both sponsor and formal plan administrator. That’s attractive to small business owners who don’t want to worry about the fiduciary and administrative requirements associated with employee retirement plans.

What to Expect in 2024

One trend affecting the popularity of employee retirement plans is the tight U.S. labor market. According to the Bureau of Labor Statistics, the unemployment rate stands at 3.8 percent as of March 2024. Overall, unemployment continues to hover near the lowest level in over 50 years. As a result, many industries have faced labor shortages, and the cost of employee resignations and training new employees is often prohibitive. As a result, employers are increasingly offering retirement plans to entice new applicants and boost retention.

Here are some other factors that we expect to impact employee retirement this year.

  • Employee retention:While offering employee retirement plans is an effective way to stand out in a competitive labor market, many small business owners don’t think they can afford to provide one. They aren’t saving for their own retirement, let alone their employees’ retirement. Data shows that it would be wise to do so, as 40 percent of employees are less likely to leave their company in the first year when offered a retirement plan option, according to Gusto.
  • ESG:To boost employee engagement in retirement planning, we expect environmental, social and governance (ESG) options to become more common in 401k plans. A recent survey by Schroders found that 87 percent of people want their investments to align with their values. Although the idea of including ESG options in 401k plans remains somewhat controversial, the trend seems unlikely to disappear, especially among younger workers.
  • Interest rates:Another trend that could affect employee retirement accounts is historically high interest rates. Government bonds, certificates of deposit and other ultrasafe instruments now offer interest rates exceeding 5 percent. Savers have recently expressed renewed interest in bonds, so employers should ensure that their retirement plans offer easy ways to invest in fixed-income securities.
  • Aging workforce: The aging workforce also affects the future of retirement. The average U.S. retirement age is increasing as workers stay in their jobs longer than previous generations. This is partly because two-thirds of Americans have nothing saved for retirement, underscoring the need for more employer-provided financial education programs.

One tool becoming popular in the employee retirement plan space is automatic enrollment. Employers using this approach automatically deduct money from employees’ wages to go into the company-sponsored retirement savings plan.

We expect that artificial intelligence (AI) technology will play an increasingly important role in employee retirement. Roboadvisors powered by AI algorithms will make financial planning more accessible and cost-effective.

The good news is that there are abundant options for small business owners who want to offer employee retirement plans ― and they don’t have to break the bank. There are several low-cost plan providers among our best picks. These companies offer small businesses many features and services previously reserved for larger organizations.

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Kimberlee Leonard, Senior Analyst & Expert on Business Operations
Kimberlee Leonard is an insurance expert who guides business owners through the complicated world of business insurance. A former State Farm agency owner herself, Leonard started her decades-long career as a financial consultant advising on investment strategies before switching her focus to insurance and risk mitigation for businesses. Leonard has developed insurance primers on everything from small business insurance costs to specific policies, such as excess liability insurance. She has also reviewed business software tools, analyzed employee retirement plan providers and continues to share insights on financial topics as they relate to business. Leonard's work has been published in Forbes, U.S. News and World Report, Fortune, Newsweek and other respected outlets.
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