Best Business Employee Retirement Plans of 2024

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

To determine the best employee retirement plans on the market, our team of HR experts and analysts evaluated an initial list of 23 plan providers. After narrowing our list down to 10, we chose six services as our top recommendations. Our experts and analysts studied each vendor’s administrative platform and evaluated their retirement offerings on more than 30 factors.

These factors were weighted differently in our overall conclusion. The weights were determined based on how much business owners prioritize these criteria when shopping for business software and services and making purchasing decisions.

• Pricing (30%): Our experts and analysts compared and contrasted each vendor’s plans, judging which packages offered the best bang for your buck. They took into account monthly rates, per-employee fees, implementation costs, administrative charges and investment fees.
• Features (25%): We looked for standard retirement plan features like a variety of plan types to choose from, extensive investment options, an intuitive dashboard for employer and employee administration, and advisory services. We also assessed the available integrations and awarded extra points for advanced services, like AI-powered financial planning tools.
  
• Ease of Use (20%): We tested every retirement plan sponsor’s administrative software ourselves, gauging each platform’s learning curve, user-friendliness and customization options. We also considered how seamlessly the program worked with payroll software and whether there was a mobile app for retirement plan management on the go.
  
• Customer Service (15%): We evaluated the range of customer service options, including whether phone assistance was provided with all package tiers. We also examined each vendor’s online resources for businesses interested in self-guided help.
  
• Expert Analysis (10%): Given that our HR experts know and understand employee retirement plans better than anyone, their personal insights from years of experience and hands-on testing were also considered when deciding our best picks.

Based on these criteria, we not only determined which employee retirement plan providers our readers could trust but also the ways in which each vendor could best serve different business needs. Some plan sponsors and their software were better at certain tasks than others or more suited to a particular type of company. These takeaways informed the “Best for” use cases you see on this page.

To learn more about our methodology, see our full editorial process.

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.