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Best Business Employee Retirement Plans of 2022

By
Donna Fuscaldo
,
business.com Staff
| Updated
May 20, 2022

Looking for an employee retirement plan for you and your staff? Before you select one, check out our guide and best picks.
Best for Affordability
Low monthly employer costs
Relatively low employee fees
Customizable and flexible plans
Best for Small Businesses
ADP
Variety of retirement plans
ADP payroll integration
Easy enrollment with mobile app
Best for Transparency
American 401k
Transparent and clear pricing
Expense ratio disclosed upfront
Access to thousands of funds, ETFs
Best for Low Fees
ShareBuilder 401k
Investment fees below 1%
Low-cost investment choices
Affordable employer pricing
Best All-in-One Solution
Integration with Paychex payroll
Variety of retirement plans
Fiduciary support
Looking for an employee retirement plan for you and your staff? Before you select one, check out our guide and best picks.

Best Employee Retirement Plans

As a small business owner, you want to offer your employees a competitive benefits package, but you may feel overwhelmed at the prospect of an employee retirement plan. Luckily, many employee retirement plans on the market are designed for small businesses. To save you the time of poring over all the plan details and fees, we did the work for you. We researched setup costs, prices for employers, plan types, and investment fees to determine the 10 best employee retirement plan providers for small business owners. Read on to learn about our recommendations and why we selected them.

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How We Decided
Our team spends weeks evaluating dozens of business solutions to identify the best options. To stay current, our research is regularly updated.
23
Considered
10
Researched
10
Selected

Compare Our Best Picks

Vendor Use case Editor's score Plan options Minimum # of employees Cost to employers Low investment fees Online and mobile enrollment Acts as fiduciary Transparent pricing Setup and administration fees
ADP Best for small businesses 9.2/10 Traditional 401(k), individual or solo 401(k), SIMPLE IRA, safe harbor 401(k), Roth 401(k) No Not disclosed Not disclosed Both Yes No Not disclosed
American 401k Best for transparency 9.04/10 Traditional 401(k), safe harbor 401(k), solo 401(k) No Annual fee: $500 + $20 per participant Yes; annualized program fee total: 0.65% Online only Yes Yes One-time $250 setup fee; administration fee of $500 + $20 per participant per year
Human Interest Best for affordability 9.5/10 Traditional and Roth 401(k), 403(b), safe harbor plans, profit-sharing plans No $120 per month + $4 per employee for Essentials plan; $150 per month + $6 per employee for Complete plan; $180 per month + $8 per employee for Concierge plan Yes; annualized program fee total: 0.57% Both Yes Yes NoneTK
ShareBuilder 401k Best for low fees 9.3/10 Solo 401(k), safe harbor 401(k), traditional 401(k), tiered profit-sharing 401(k) No $25 to $195 per month for administration, depending on plan Under 1% Online only Yes No Not disclosed
Paychex Best all-in-one solution 9.34/10 Traditional 401(k), owner-only 401(k) and solo 401(k) for sole proprietors, SIMPLE IRA No Not disclosed Not disclosed Both Yes No Not disclosed
Perfect401(k) Best for easy implementation 9/10 Traditional 401(k) plans TK 10 $375 per quarter for 10 employees + $7.25 per quarter for each additional employee 0.67% or less Online only Yes Yes NoneTK
Fidelity Best for self-employed 9.24/10 SEP IRA, SIMPLE IRA, self-employed 401(k), investment-only retirement account, traditional 401(k) No Not disclosed 0.50% Both Yes Yes One-time $500 startup fee, $300 quarterly service fee, and $100 subscription fee
Guideline Best for compliance 9/10 401(k), Roth 401(k), safe harbor 401(k), SEP IRA No $49 per month + $8 per employee for Core plan; $79 per month + $8 per employee for Flex plan; $129 per month + $8 per employee for Max plan 0.08% Online only Yes Yes NoneTK
Vanguard Best for investment flexiblity 9.1/10 SIMPLE IRA, SEP IRA, individual 401(k), traditional 401(k) No Not disclosed Not disclosed Both Yes No $20 annual account service fee for each Vanguard fund held in each particpating employee's account
Shelton Capital Best for customer support 8.9/10 Small business 401(k) plans No Not disclosed Not disclosed Online only Yes No Not disclosed

Our Reviews

Human Interest: Best Employee Retirement Plan for Affordability

Small business owners who don't want to play a lot for an employer-sponsored retirement plan will appreciate Human Interest's affordable pricing.
Human Interest doesn't hit you with any extra charges and keeps investment fees low for your employees.
Human Interest leads with technology when signing up small businesses and enrolling employees in the plan, which may not appeal to less tech-savvy business owners.

Variety is the spice of life, but for small business owners, particularly since the pandemic, cost matters – a lot. Many know they have to offer an employer-sponsored retirement plan to stay competitive but can't afford to spend a ton on it. Cash-strapped small business owners need a low-cost plan that still provides a variety of investment choices and strong customer support. Human Interest checks off those boxes, which is why it's our best pick for affordability. Its cheapest plan, Essentials, costs $120 a month plus $4 per employee. For that fee, you get integration with more than 100 payroll providers, the ability to create flexible plans, and automated plan administration and recordkeeping.

Editor's score: 9.5/10

If you want Human Interest to handle everything – including procuring your ERISA bond, acting as your plan administrator and 3(16) fiduciary, and signing and filing your IRS documents – it will only cost you $150 a month plus $6 per employee. Its highest pricing plan costs $150 per month and $8 per employee, which gets you everything in the two other plans plus dedicated account management. Human Interest also charges a $499 one-time setup fee, which the company waives when running promotions. In contrast, other providers we examined charge a $250 one-time installation fee, a $500 annual fee, and $20 per participating employee.

Another reason we think Human Interest is right for businesses focused on price is that it keeps costs down for participating employees. The investment fees are 0.5% per year plus 0.07% in average fund fees, compared with 1.65% on average for small 401(k) plans. Another nice feature Human Interest offers is free access to built-in investment advice and automatic portfolio rebalancing for employees.

Read Human Interest Review

ADP: Best Employee Retirement Plan for Small Businesses

ADP offers a variety of retirement plans, from traditional 401(k)s to Roth 401(k)s, making it ideal for any small business.
It serves as a one-stop solution for payroll and employee benefits.
ADP doesn't lay out its pricing on its website. To get a sense of how much you'll pay per employee, you must take the added step of contacting ADP, which may not appeal to time-crunched business owners.

Small businesses come in different shapes and sizes, and so do the employee retirement plans that are right for them. A traditional 401(k) may be ideal for one company, but a safe harbor 401(k) may be the better option for another. That's where ADP comes in. It offers a variety of employer-sponsored retirement plans to meet the needs of all sizes of business. Whether you are a sole proprietor or a team 100 strong, ADP has an employee retirement plan for you.

Editor's score: 9.1/10

With ADP, you can open up a traditional 401(k), individual or solo 401(k), SIMPLE IRA, safe harbor 401(k), or Roth 401(k). But choice in plan type is not the only reason we selected it as the best for small businesses. ADP's employee retirement plans integrate with its payroll services, giving you a one-stop shop for all your human resources needs. That's important for time-crunched business owners who don't have the staff or expertise to manage payroll and benefits on their own. ADP handles it all for you, freeing up time for you to focus on running and growing your business.

ADP also stands out to us because it has a mobile app that makes it easy for employees to enroll in the plan. The app also keeps workers engaged, providing a real-time snapshot of their retirement savings. A big problem for small businesses that offer a retirement savings plan is low employee participation rates. An easy-to-use mobile app can change that.

Another aspect of ADP that stood out to us for small businesses is its customer service. When you offer an ADP employee retirement savings plan, you get a manager dedicated to helping you get it up and running. Employers who have never offered one before will undoubtedly appreciate that assistance.

ADP offers a variety of retirement savings plans, makes it easy to enroll, and provides you with a dedicated manager to assist you. Add robust payroll and human resources software to the mix, and you can see why ADP is our best pick for small businesses.

Read ADP Review

American 401k: Best Employee Retirement Plan for Transparency

Small business owners who don't have the time or desire to contact vendors directly will appreciate American 401k's transparency.
When you work with American 401k, you know exactly how much the plan will cost you and your employees.
American 401k offers 401(k) plans for companies with at least one employee. If you are a solo entrepreneur, this isn't the plan provider for you.

Many small business owners don't have time to bill clients, let alone sit on the phone with an employee retirement plan provider to get an accurate quote. They want to visit the website and leave with a clear picture of how much the plan will cost them and their employees. American 401k provides that and then some, which is why it's our best pick for transparency.

Editor's score: 9.04/10

When working with American 401k, you know exactly how much you'll pay in one-time and monthly fees. You also know how much your employees will pay in investment fees. Many other employee retirement plan providers require you to contact them to get a quote, which can be time-consuming and inconvenient. American 401k is also very transparent about the fees it charges.

To make itself even more transparent, American 401k provides expense data upfront and easy-to-read reports. We like that there are more than 15,000 funds and 1,000 ETFs to choose from. Some plans limit your access, which could hurt adoption rates. American 401k doesn't limit the number of investment slots your plan can offer either. To keep the costs down, American 401k participants qualify for institutional funds regardless of the minimum initial investment. Institutional share class mutual funds are low-expense investments available on certain 401(k) plans.

Of the employee retirement plan providers we reviewed, American 401k is the most transparent. There are no surprises with this vendor, which is why it's our best pick for transparency.

Read American 401k Review

ShareBuilder 401k: Best Employee Retirement Plan for Low Fees

ShareBuilder keeps employees' investment fees low without compromising quality and variety.
ShareBuilder makes it easy for employees to enroll in its plans, which can boost participation.
ShareBuilder does not list its exact price for employers on its website. You get a starting cost, but you have to contact the company for a specific quote.

Small business owners know they have to offer a tax-advantaged retirement savings plan, but that doesn't mean all employees will take advantage of it. As of March 2020, 60% of workers had access to an employer-backed retirement savings plan, but only 43% participated in it, according to the U.S. Bureau of Labor Statistics. One way to increase plan enrollments is to keep employees' investment fees down. ShareBuilder 401k does exactly that, which is why it's our choice as the best employee retirement plan provider for low fees.

Editor's score: 9.3/10

This employee retirement plan provider relies on index funds to keep investment fees way below 1%. That's impressive, given that the average investment fee is 1.65%. ShareBuilder claims to be up to 68% cheaper than rivals.

Index funds are low-cost, passive funds that track a basket of stocks. Employees participating in ShareBuilder's 401(k) plans can select from a variety of index funds, including bonds, treasuries, commodities, alternative investments, and large-cap, mid-cap, and small-cap stocks. ShareBuilder also keeps plan fees for employers low, charging a flat monthly fee. A big bonus is that ShareBuilder digitizes the entire process, automating paperwork and administration, which makes it easy to access the plan wherever you have an internet connection.

With 22 index funds for you to select from and five model portfolios to emulate, ShareBuilder provides a lot of variety while keeping investment fees low. That's a win for employers and employees alike, which is why ShareBuilder 401k is our best pick for low investment fees.

ShareBuilder 401k also offers customers automatic discounts based on their investments. No matter how many employees participate in your plan, certain criteria can lower your costs. The more assets your business holds in its plan, the more money you save on your ShareBuilder account. For example, if your plan’s assets are more than $5 million, you don’t have to pay an administration cost.

Read ShareBuilder 401k Review

Paychex Retirement Services: Employee Retirement Plan with the Best All-in-One Solution

Paychex is best suited for small business owners who want an all-in-one solution for their payroll and retirement benefit needs.
The Paychex Flex platform lets you manage your retirement plan and empower employees with self-service tools.
You need to contact the company to get a clear idea of how much Paychex will cost you each month. This is common in the industry, but often inconvenient for small business owners.

Time is money, and the more of it you spend on your employees' paychecks, benefits, and retirement savings, the less time you have to grow your operations. That's where all-in-one solutions like Paychex come in. Using one platform to handle all aspects of employee payroll and benefits frees up time to do what you do best – run your small business. No vendor does all-in-one better than Paychex. Paychex has been in the industry for decades, providing a full suite of payroll and HR services for companies. As one of the country's leading 401(k) recordkeepers, it knows a thing or two about administering retirement plans for small businesses. Its 401(k) offering is particularly robust, giving small business owners several options, including traditional 401(k) plans, owner-only 401(k) plans, solo 401(k) plans for sole proprietors, and SIMPLE IRAs. Paychex works with you to create a customizable plan that meets your business's needs.

Editor's score: 9.34/10

Through the Paychex Flex all-in-one HR platform, you can manage your retirement offerings and give your employees access to retirement self-service tools. From enrolling employees to maintaining and managing the plan, Paychex Flex takes care of all the details of payroll and retirement benefits. (Learn more in our Paychex Flex review.) We like that Paychex also assigns you a dedicated team to help you roll out and administer the plan.

The Paychex Flex platform includes access to financial wellness services via a FinFit integration. Being able to take advantage of services like this can help employees look at their current budgetary needs, which in turn can help ensure they are properly investing and saving for their retirement. Having access to services like this isn't something all providers offer.

All-in-one HR and retirement platforms offer some significant benefits, such as simplifying management, reducing errors, and saving time. If you want a one-stop shop for your business's HR needs and retirement benefits, look no further than Paychex, our best pick for all-in-one solutions.

Read Paychex Retirement Services Review

Perfect401(k): Best Employee Retirement Plan for Easy Implementation

You get a team of implementation managers with Perfect401(k), which makes offering a retirement savings plan quick and easy.
Employees can enroll in the plan online or in the mobile app. The easier it is to sign up, the higher the participation rate.
Perfect401(k) requires you to have at least 10 employees to offer its 401(k) plan, shutting out some small businesses.

Small business owners know they need to offer retirement benefits, but many are scared off by what they think will be the arduous task of getting a plan up and running. What they don't realize is how quick and easy some employee retirement plan providers make it to implement a plan. To us, Perfect401(k) falls squarely in that category. Whether you want to open a new plan or roll over an existing one, Perfect401(k) makes the process easy. 

Editor's score: 9/10

Take Perfect401(k)'s process to start a plan. It assigns you an implementation team that manages all aspects, including designing the plan, preparing enrollment materials, and training employees to use it. That's good news for employers who don't have time to create a retirement savings plan and roll it out to staff. Perfect401(k) also makes it easy for employees to enroll in the plan online or via its mobile app. Not all plan providers have a mobile app, so we like that Perfect401(k) offers this type of access. Offering a retirement savings plan is one thing; getting employees to participate is another. A mobile app reduces the friction associated with enrollment, potentially boosting employees' participation. 

Perfect401(k) also takes the complexity out of choosing investments, offering close to 20 low-cost mutual funds. Employees can choose from three investment approaches: a fully managed portfolio, a guided portfolio, and a self-directed one. The company's Core Funds Portfolio lets employees select from a curated list of investments from Vanguard, Charles Schwab and exchange-traded funds (ETFs). DIY investors can establish a brokerage account with Charles Schwab. With a fully managed portfolio, a financial advisor handles the investment choices. Throughout the setup process, Perfect401(k) has you and your employees covered, which is why it's our best pick for easy implementation.

More

Fidelity Investments: Best Employee Retirement Plan for Self-Employed Workers

Fidelity doesn't have any opening or closing costs or an annual fee. With U.S. 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.

A SEP IRA 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. 

Editor's score: 9.24/10

Not only does Fidelity offer a ton of investment choices with its SEP IRA plans, but there are no opening or closing costs, nor annual fees. What's more, U.S. stocks, ETFs, and options trades have no commissions. The commission-free trades and absence of administration costs stood out to us when we were researching employee retirement plan providers. Small business owners are looking for the cheapest way to save for their retirement, and Fidelity delivers. 

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, making it our best pick for self-employed workers. 

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Guideline: Best Employee Retirement Plan for Compliance

Guideline makes sure business owners don't run afoul of IRS nondiscrimination rules by offering safe harbor plans.
With three price points, Guideline's safe harbor 401(k) plan can fit all small businesses' budgets.
To take advantage of Guideline's safe harbor 401(k) plan, you have to offer a matching component for participating employees.

Small business owners who don't want to fail the IRS' nondiscrimination tests (designed to ensure the retirement plan doesn't favor high-earning employees) but don't have the time to manage it on their own will appreciate a safe harbor 401(k) plan. With a safe harbor 401(k), you comply with the IRS test as long as you match your employees' contributions to their accounts – an added expense, yes, but an attractive way to recruit and retain top talent. Nobody does safe harbor plans better than Guideline, which is why it's our best pick for compliance. 

Editor's score: 9/10

Let's start with Guideline's pricing. Its basic plan costs $49 plus $8 for each participating employee per month. For $79 a month, you get to pick and choose the offerings in the plan. For $129 per month, you get even more customizable features. The cheapest plan gets you integration with Gusto, while the most expensive plans give you a dedicated account rep. We like that even budget-conscious small businesses have access to a safe harbor plan. After all, the penalties for noncompliance can be expensive, not to mention time-consuming. 

It's not just employers who save with Guideline's safe harbor plan. The company only charges plan participants a 0.08% account fee, which amounts to 67 cents for every $10,000 saved. Meanwhile, its managed portfolios have a blended average mutual fund expense ratio under 0.07%. When combined with its 0.08% account fee, it's lower than the average 1.68% charged in 401(k) investment fees. Employers who sign up for a 401(k) by Dec. 31, 2021, don't have to pay the monthly base fee and participant fee for one month after the new plan begins.

Besides its costs and compliance benefits, Guideline offers customers automatic enrollment, full management of employee changes, and an easy-to-use dashboard for employers and plan participants. This is all designed to increase participation and keep employees engaged with their retirement savings. IRS compliance is a part of offering a 401(k) plan that small business owners may not consider. The ones who don't want to deal with it should consider Guideline's safe harbor 401(k) plan.

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Vanguard: Best Employee Retirement Plan for Investment Flexibility

Vanguard offers small businesses a wide range of investment choices with its 401(k) plans, from ETFs to target-date funds.
With Vanguard, your plan participants have access to outperforming funds and managed portfolios at a very low cost.
Vanguard's small business 401(k) plans and SIMPLE IRA are designed for companies with 100 or fewer employees.

Whether you're opening a 401(k) plan for just yourself or also for your employees, investment flexibility matters a lot. Sure, cost is a significant factor, but so is the makeup of the plan. You don't want to be stuck with limited investment choices or strict rules and requirements, not to mention hefty fees. You won't have to deal with any of that if you select Vanguard for your 401(k) plan. 

Editor's score: 9.1/10

The king of low-cost investing, Vanguard has been helping individuals and small businesses save for retirement for more than 40 years. It offers 401(k) participants a bevy of investment choices, from target-date funds to ETFs. We like Vanguard's wide selection of target-date funds for small businesses. These investments are a low-cost way to put your retirement savings on autopilot. Vanguard's funds aren't just any old funds; they tend to be top performers. According to a 2020 Thomson Reuters Lipper study, 87% of Vanguard's funds have outperformed its peers over the past decade. On top of that, Vanguard keeps it cheap: The average fund expense ratio at Vanguard is 84% lower than the industry average, according to its 2019 study in conjunction with Morningstar.

The investment flexibility doesn't end there with Vanguard. It offers small businesses a variety of retirement savings plans, including a SEP IRA, individual 401(k), small business 401(k), and SIMPLE IRA. For larger businesses, Vanguard offers traditional 401(k) and 403(b) plans. Another bonus of Vanguard is no minimum initial investment required to open a small business retirement account. Vanguard is a paragon in the investment world. When you select it for your employee retirement plan, you get a bevy of low-cost investment choices, streamlined account management via its small business online portal, and top-notch customer service, making it our best pick for investment flexibility. 

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Shelton Retirement Plan Services: Best Employee Retirement Plan for Customer Support

Shelton Capital provides small business owners with concierge-level support, from selecting the plan to implementing it.
When you work with Shelton Capital, you're assigned your own manager as your company's point of contact for all your 401(k) needs.
Shelton Capital does not disclose its pricing on its website; you must contact the company to get a quote. That may not matter to business owners who want hands-on help, but some just want to do quick price comparisons.

Not every small business owner is the DIY type. Some want hand-holding when selecting a retirement saving plan or offering it to employees. That is where Shelton Capital comes in. This employee retirement plan provider personally walks its customers through the entire process of setting up a 401(k) plan. But even better, and why we selected Shelton Capital as the best for customer support, the company stays with you long after you implement the plan.  

Editor's score: 8.9/10

Shelton Capital adopts a concierge approach to customer service, which means you are assigned a manager who is your main point of contact. That person is tasked with helping you select a plan based on your budget, enrolling your employees, and supporting you and your staff once the plan is implemented. You don't get that kind of support from an app.  

Not only do business owners have access to live customer support, but so do plan participants. Shelton Capital also offers online help and live, onsite investment education sessions with your workers. This is one important reason Shelton Capital is our best pick for customer support. You have to make it as easy as possible for your employees to participate in the plan. By providing onsite training, you can ensure all your employees' questions and concerns are addressed. That type of engagement is hard to replicate on a video call. Small business owners who want help with all aspects of their employee retirement savings plan need not look further than Shelton Capital. When working with this vendor, you get concierge-level support that not all retirement savings plan providers offer.

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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.
  • 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 (though 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 your liability insurance company, or your retirement services provider can recommend a source. 

TipTip: 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. 

FYIFYI: 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.

Buying Guide

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.

Which Type of Plan Is Right for You? 

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.

Consider the following plan types if you have employees and … 

  • Want to make Roth contributions: Traditional 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 

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 2022 are capped at $20,500, though catch-up contributions up to $6,500 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 2022 – including both employee and employer 401(k) contributions – is $61,000, or $67,500 for employees age 50 and over. 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 Dec. 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 2021 are $19,500. Catch-up contributions of up to $6,500 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 2021 (including both employee and employer contributions) is $58,000, or $64,500 for employees age 50 and over. 

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.  

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 2021 are $19,500, plus a catch-up contribution of $6,500 for individuals age 50 and over. 

Rules and Deadlines for Individual 401(k)

Individual 401(k) plans must be established by Dec. 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 (MAGI) 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 2021 is $6,000. 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 $6,000, or $7,000 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. 

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

Employers can choose which years they contribute to employee accounts. Employees are not allowed to make contributions under this plan, but they can boost their retirement income by contributing to a traditional or Roth IRA. 

Employers must make contributions for all eligible employees, using the same salary percentage. For 2021, the contribution limit is the lesser of 25% of the employee's compensation or $58,000. Contributions are 100% vested. 

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 or not 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 $13,000 in 2019. Those age 50 and over may also make catch-up contributions of $3,000. 

Employers must either match up to 3% for participating employees or make a 2% contribution to all employee accounts. Those who choose to match can reduce their contributions to 1% in any two out of five years. 

Rules and Deadlines for SIMPLE IRA

SIMPLE IRAs must be established by Oct. 1. All employees 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

AS A SMALL BUSINESS OWNER, WHY SHOULD I CARE ABOUT OFFERING A RETIREMENT PLAN? 

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. 

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 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 (soon) 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. For example, California will require compliance from businesses with just five or more employees by June 2022. 

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. 

HOW MUCH WILL A RETIREMENT PLAN COST MY BUSINESS? 

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 or not you will match or contribute to your employees' IRA or 401(k) accounts. 

HOW MUCH CAN SMALL BUSINESS OWNERS AND EMPLOYEES CONTRIBUTE TO A 401(K)? 

For 2022, employees can contribute up to $20,500. Employees age 50 and older can make an additional $6,500 catch-up contribution. Employers' contributions cannot exceed 25% of an employee's compensation. For 2022, employees and employers can contribute a total of $61,000 for people under 50 and $67,500 for those over 50. 

HOW DO YOU SET UP A RETIREMENT PLAN FOR YOUR EMPLOYEES? 

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. 

WHAT ARE THE DIFFERENT RETIREMENT PLANS?  

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.  

WHAT IS A POOLED EMPLOYER PLAN? 

Since the SECURE Act of 2019, small businesses can join with other businesses to participate in a 401(k) plan. A pooled employer plan 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 2022

The last few years have been tough for small business owners. The COVID-19 pandemic has wreaked havoc on countless businesses, many of which have closed their doors forever. However, as a new normal is setting in, the job market has picked up steam significantly. Employers are looking for ways to entice employees to join their organizations. One way they are doing so is by offering robust employee retirement plans.

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 offer one. They aren't saving for their own retirement, let alone their employees' retirement. 

Research found that in 2020, many employers, 12% were forced to cut or reduce their 401(k) contributions because of the pandemic. It will be interesting to see whether companies resume their matches or continue not offering them in 2022. Data shows they would be wise to get them back on the books, as  40% of employees say they’d leave their current company to work at one that offers retirement plans.

The good news is the 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, including Human Interest. These companies offer small businesses many features and services previously reserved for larger organizations. One tool becoming popular in the employee retirement plan space is automatic enrollment. Employers automatically deduct money from employees' wages to go into the company-sponsored retirement savings plan with this approach. 

Donna Fuscaldo
business.com Staff
Donna Fuscaldo is a senior finance writer at business.com and has more than two decades of experience writing about business borrowing, funding, and investing for publications including the Wall Street Journal, Dow Jones Newswires, Bankrate, Investopedia, Motley Fool, and Foxbusiness.com. Most recently she was a senior contributor at Forbes covering the intersection of money and technology before joining business.com. Donna has carved out a name for herself in the finance and small business markets, writing hundreds of business articles offering advice, insightful analysis, and groundbreaking coverage. Her areas of focus at business.com include business loans, accounting, and retirement benefits.
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