401 k plans for small business owners

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Give your business an edge with competitive retirement benefits

A small business 401(k) footnote  10 is a streamlined and affordable retirement plan designed with small business owners and their employees in mind., small business 401(k) features, to learn more about how a small business 401(k) can benefit you and your business, select any of the links below., discover affordable and straightforward pricing, pricing for your business footnote  6, pricing for individuals with a balance footnote  7, what's a key difference between a small business 401(k) and a simple ira, get started with a small business 401(k) in 3 easy steps, answer a few questions, review your proposal, purchase your plan, explore all plans available for small business, frequently asked questions, what types of businesses can set up a small business 401(k), what are the potential tax benefits of a 401(k), how much can employers contribute annually, how much can employees contribute annually, does my business have to contribute to employee accounts, what is a safe harbor plan, how much does it cost to set up and administer a small business 401(k) for my company, what is the difference between roth and traditional 401(k) contributions.

• The basic difference between Roth and traditional 401(k) contributions is when taxes are paid out. For Roth contributions, federal taxes are due in the same year you contribute. When you take a qualified withdrawal from your 401(k), earnings gained on top of the Roth contributions you made will be tax free. A qualified withdrawal for Roth contributions is one that is made at least five years after the year of your first designated Roth contribution (counting the first year as part of the five) and is made on or after attainment of age 59½, disability, or death. IRS Retirement topics, Designated Roth Account  popup State income tax laws vary, and we recommend consulting with a tax professional to determine how your state treats Roth distributions from qualified plans (which include 401(k) plans).
• Traditional 401(k) contributions do not require taxes to be paid at the same time you contribute. For traditional 401(k) contributions, taxes on contributions and earnings are due when withdrawn. Consult with a tax professional to determine further requirements, if any, on your 401(k) withdrawal for traditional 401(k) contributions.

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1. The maximum annual credit is the greater of $500 or $250 per eligible non-highly compensated employee up to $5,000. The credit cannot exceed 50% of qualified startup costs paid or incurred during a tax year for businesses with between 51 and 100 employees. For businesses with up to 50 employees, the credit may not exceed 100% of qualified startup costs paid or incurred during a tax year. Estimated based off the number of employees above and assumes two highly compensated employees (defined as having annual gross salaries over $150,000). The employer may benefit from additional tax deductions on fees and matching employer contributions, and may be eligible for additional tax credits for five years of up to $1,000 per employee equal to the applicable percentage of eligible employer contributions to an eligible employer plan. Certain other restrictions apply with respect to these additional tax credits. Please consult your tax or legal advisor for more information.

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Schwab makes it easy to get a retirement plan that's individually designed for your business, regardless of its size. With a 401(k) plan, employees can typically make larger salary deferrals than with other retirement plans, and your business gets tax benefits.

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A 401(k) plan is suitable for a company of any size that is looking for a retirement solution that allows high levels of salary deferrals by employees. Plans are generally offered to all employees at least 21 years of age who worked at least 1,000 hours in the previous year.

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Table of Contents

How to choose a 401(k) provider

7 best 401(k) providers for small businesses.

Regardless of your business’s size, offering your employees a retirement savings plan is a crucial part of any HR operation. The key is to choose a 401(k) provider that is specially equipped to provide small businesses with quality retirement plans, investment advisory services and administrative support.

There are a few retirement plans available for self-employed and small businesses, including SEP-IRA, SIMPLE IRA and individual 401(k) plans, but traditional 401(k) plans are by far the most common option. Traditional 401(k) plans allow participants to make pre-tax contributions to an individual retirement account up to the limit set by the IRS. Employers can also choose to make contributions on behalf of their employees, match their employees’ contributions or both, also up to the IRS limit.

In this guide, we’ll go over seven of the best 401(k) providers for small businesses and walk you through how to go about choosing the best 401(k) provider for you and your employees.

» MORE : NerdWallet's best HR software for small businesses

You’ll first need to choose the firm that provides the type of retirement plan you really want to offer, whether that’s a traditional 401(k) plan or something else. Also take a look at the plan design to ensure that their eligibility requirements, vesting schedule, investment options and other details are appropriate for your employees. You’ll also need to evaluate the fees attached to your retirement plan. Often, fees vary depending on your business and the number of employees, so you will need to get in touch with each provider directly to receive a quote.

On a qualitative level, you’ll likely want to work with a 401(k) provider with excellent customer service, individualized investment and plan design guidance and a support team that’s easy to reach — especially because the landscape of retirement plans can be confusing to navigate, both for you and your employees.

Moreover, you should consider a provider that acts as a fiduciary advisor. Fiduciaries are legally and ethically bound to provide unbiased investment advice that aligns with their clients’ best interests. They also manage, monitor and adjust their clients’ retirement plans. There are several types of fiduciaries, but you’ll most often see the term 3(38) fiduciary.

Also note that a couple of the 401(k) providers in this round-up are online-based, which is a great option if you’re looking to really streamline and digitize this process. Certain providers can offer employer benefits beyond 401(k) plans, as well, which is a good option if you want to integrate all your fringe benefits under one provider.

Here are seven of the best and most reputable 401(k) providers for small businesses that you should consider in 2022.

ADP is one of the most respected names in payroll processing, but their comprehensive HR and employer services suite includes retirement plans and administration. While they can serve businesses of all sizes, ADP is unique in that they extend their full arsenal of services and decades’ worth of expertise to small businesses (which they define as businesses with one to 49 employees), in addition to large enterprises.

If you sign up for ADP’s retirement planning service, you’ll have access to a team of professionals who can help you browse, choose and customize which of their available retirement plans is best for you and your employees. In addition to 401(k) plans, ADP offers SIMPLE and SEP IRA options, which are great choices for very small businesses. They also offer tiered investment options, which are suitable for investors with all experience levels.

Once they’ve helped you design a retirement plan, your ADP advisors will help you implement and manage your plan to ensure you’re staying compliant. If you’re an ADP payroll client, your retirement plan’s record-keeping system will automatically integrate with your payroll system.

2. Betterment for Business

Betterment for Business is the 401(k) channel of Betterment, a robo-advisor that helps consumers make smarter investment choices using a combination of technology and human expertise. With this service, Betterment for Business’ human advisors and technology help business owners design 401(k) plans and advise employees on the smartest investments they can make in a variety of ETFs to optimize their retirement savings. Betterment for Business is a certified 3(38) fiduciary, so they’re legally and ethically required to act in your company’s best interests when giving investment advice.

Obviously, Betterment for Business is only a viable option if you and your employees are comfortable using a robo-advisor and managing your plan digitally. If you are interested, we’d recommend taking a look at our Betterment for Business review for a more in-depth understanding of this unique 401(k) provider.

3. Charles Schwab

Charles Schwab is one of the most established and best-known investment and retirement firms in the country — a better option if you consider yourself a bit too much of a technophobe to opt for a robo-advisor. Charles Schwab offers a managed account service that offers your employees personalized advice on a range of investment options, including ETFs or index mutual funds.

They’ll also provide ongoing account monitoring and automatic adjustments. As an alternative, Charles Schwab also offers SIMPLE and SEP IRA plans; or, if you’re self-employed, you can opt for their Individual 401(k) plan, which is essentially a traditional 401(k) plan designed particularly for individually owned businesses. It’s worth noting that this plan has no setup or monthly maintenance fees.

4. ShareBuilder 401k

Sharebuilder 401k allows self-employed individuals and small businesses to buy and set up low-cost 401(k) plans completely online. They also act as 3(38) fiduciaries, so they’re certified to make investment advice, manage portfolios, and handle plan administration.

With Sharebuilder 401k, you’ll have four retirement plan options: Solo 401(k), Safe Harbor 401(k), Traditional 401(k) and Tiered Profit-Sharing 401(k). All plans require a one-time setup fee, a flat monthly administration fee and an annual fund fee that varies from 0.04% to 0.39% per year. Investment options include index ETFs and five types of model portfolios based on the individual investor’s risk tolerance.

5. Fidelity Investments

Another trusted name in retirement services, Fidelity has over 30 years of experience and currently over 30 million plan participants under their belt. Fidelity can service businesses of all sizes, but they say that 86% of their business clients have fewer than 500 employees — so despite the big name, they’re fully equipped to serve small businesses.

Fidelity’s 401(k) plan offers a wide range of investment options, including over 16,000 mutual funds from 380 fund companies. They also offer comprehensive advisory services, as well as administrative, reporting and compliance support, and you can reach their advisors either in person, online or over the phone. Their advisors will help you design a plan or you can choose to work with your current broker. Plus, Fidelity has an app and online dashboard where you and your employees can view and manage their plans and get in touch with advisors whenever they need. Beyond retirement plans, Fidelity also offers integrated employer benefits, including payroll and health plans.

6. T. Rowe Price

At 83 years old, T. Rowe Price is the most established asset management firm on this list. They offer four retirement plans for small businesses: SEP-IRA, SIMPLE IRA, Individual 401(k) and a 401(k) for Small Business. The former three plans are best for self-employed individuals or businesses with under 100 employees, while the latter plan is best suited for businesses with up to 1,000 employees.

Under the 401(k) for Small Business, plan sponsors can choose from over 100 no-load mutual funds and over 5,400 non-proprietary funds. T. Rowe Price also offers plan participants 24/7 phone support, plus an online portal where they can manage their plans and conduct transactions.

7. Merrill Edge

Under the Merrill Small Business 401(k) plan, independent advisors select and manage funds and model portfolios for all participants. Unlike the other participants on this list, pricing for this plan is very transparent: It costs a one-time setup fee of $390 and a monthly administration fee of $90. Then, each participant is responsible for a $4 monthly recordkeeping fee and an annual asset-based fee of 0.52%. You also have the option of converting your existing 401(k) plan to a Merrill Small Business 401(k), in which case you may end up saving money.

Merrill Edge’s Merril Small Business 401(k) is suitable for corporations, partnerships and nonprofits, but they also offer SEP-IRA, SIMPLE IRA and Individual 401(k) plans for sole proprietorships and self-employed individuals.

» MORE: NerdWallet's best small-business apps

This article originally appeared on Fundera, a subsidiary of NerdWallet.

On a similar note...

How to Pick the Best Small Business 401(k) Plan Provider

Look at the options available and research thoroughly before choosing a retirement plan for employees.

The Best Small Business 401(k) Plan Providers

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Some 401(k) plan providers cater to smaller companies, such as a startup or those with fewer than 50 employees, while others are set up for medium-sized or large businesses.

To attract and keep talented employees, it can be a smart move to add a 401(k) plan to your small business. As a result of the SECURE Act , which was passed in 2019, there are now more opportunities for small employers to offer retirement plans. The law allows small businesses to participate in pooled employer plans, making it easier and less costly for small employers to provide workers with a retirement plan. Here's how to select the right 401(k) plan provider for your small business.

Find the Best 401(k) Providers for Small Business

Since there are many providers to choose from, keep in mind that not all will offer the same services or prices. Some 401(k) plan providers cater to smaller companies, such as a startup or those with fewer than 50 employees, while others are set up for medium-sized or large businesses.

These providers specialize in 401(k) plans for small businesses:

• American Funds. Small businesses of any size, from startups to those that have recently merged, can find traditional and Roth options through this provider.
• Betterment. Through its online cost calculator, small business owners can enter their number of employees and plan preferences to gain a personalized estimate of 401(k) costs.
• Charles Schwab. Charles Schwab provides 401(k) plans for companies of any size and creates customized plans to fit a business’ specific needs.
• Employee Fiduciary. With 401(k) plan establishment fees that start at $500, Employee Fiduciary provides personalized service from setup through plan administration.
• Fidelity Investments. Fidelity has small business 401(k) plans available for businesses with more than 20 employees and an app that employees can use to monitor their accounts.

How to Set Up a 401(k) for a Small Business

To offer a 401(k) plan for employees, the IRS lays out four steps to get started. These include:

• Adopt a written plan. If you have assistance from a professional or a financial institution, this step will usually be provided for you.
• Arrange a trust for the assets. A plan’s assets need to be in a trust to make sure they are used only for the participants and their beneficiaries.
• Develop a recordkeeping system. If you work with a financial institution, you can generally expect to have help with keeping the necessary records.
• Communicate information to employees. This includes sharing details about the plan with workers who are eligible to participate.

You will also have to decide on the type of 401(k) plan to offer employees. This could be a traditional 401(k) plan, a safe harbor 401(k) plan or an automatic enrollment plan. With a traditional 401(k) plan, the employer can elect to make contributions for all plan participants or offer a 401(k) match , but is not required to contribute. A safe harbor 401(k) plan requires the employer to make annual contributions on behalf of employees. An automatic enrollment 401(k) plan permits the company to automatically sign employees up for the plan and place salary deductions in certain investments.

Consider Whether to Match Employee 401(k) Contributions

Many employees rely on a 401(k) plan to help fund their retirement. “In our experience, a company’s contribution to the plan has become a key recruitment and retention tool of high-performing leaders,” says Eric Shisler, vice president and director of research and retirement plan services at Budros, Ruhlin & Roe in Columbus, Ohio. You might offer a match which consists of a percentage of an employee’s contribution, up to a specified percentage of the employee’s salary. Or you could provide a match up to a certain dollar amount.

Another type of employer contribution is 401(k) profit sharing, which allows a business to set aside a portion of its pre-tax profits in employee retirement accounts. You may choose to contribute a certain dollar amount, or a percentage of each employee’s salary. Before committing to contributions, you’ll want to think about short- and long-term profit projections. “Another key consideration for business owners when setting up a plan is if the company can sustain their contribution if cash flow fluctuates,” Shisler says.

Look at Small Business 401(k) Costs

Providing 401(k) accounts to employees will come with fees , and you should carefully sort through the fine print before selecting a 401(k) plan. A small business 401(k) plan might charge recordkeeping fees, investment fees and transaction fees.

Keep in mind that fees might change if the company hires more workers. “Look to understand how the fees quoted may change as the plan grows,” Shisler says. “Plans with the cheapest pricing upfront are not always the cheapest plans over time, especially with well-funded plans.”

Consider the Small Business 401(k) Investment Options

Look for a 401(k) plan that provides an assortment of investment options , rather than just a few ways to invest. “One of the major things that you want to look for in a plan for small companies is what kind of lineup of investment options will be available to the employees,” says Mike Scarborough, president and CEO of Oak Wealth Partners in Lexington Park, Maryland. “It should be broad-based in the sense that it should have large and small stocks, various types of bonds, some international exposure that is very broad-based, as well as emerging markets."

Carefully Select a Small Business 401(k) Provider

You’ll typically want to involve experts in the financial industry to help oversee the 401(k) plan. "Many individuals in the financial services industry can sell you a plan, but usually there are certain advisors who specialize in working with 401(k)s," says Art Haws, CEO and managing partner and HawsGoodwin Wealth in Franklin, Tennessee. "They can help you navigate the many issues and decisions made when starting and maintaining a plan."

A trustee will manage the 401(k) plan assets, and carries the responsibility of making decisions according to the plan's terms. A 401(k) custodian does not make management decisions, but holds plan assets.

When researching options, ask about the third party administration setup. "Some plans bundle the TPA services like plan design and documents, testing and tax preparation, while others require you to work with an outside TPA," Haws says. "An experienced financial advisor can help explain the benefits of either, and recommend the best solution for your specific situation." Some financial professionals will help you communicate about the retirement plan to employees. Also ask about payroll integration, as a 401(k) provider with payroll-related services might make your 401(k) plan easier to manage.

How to Max Out Your 401(k) in 2021

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Plans + pricing, take a guided tour, watch a demo, solution finder, call us today:, 401(k) for small business owners: the comprehensive guide.

Last Updated: October 13, 2023 | Read Time: 14 min

One-Minute Takeaway

• A 401(k) plan offers employees a tax-advantaged way to save for retirement, often with employer matching contributions.
• Small business owners can elect to self-administer or use a financial adviser to manage their 401(k) plan.
• Self-administration involves a lot of record-keeping and compliance management.

As a small business owner, you have your hands full, juggling roles that range from daily operations manager to long-term strategy architect. But have you ever considered adding the role of “Retirement Benefits Planner” to your list? Offering a 401(k) plan not only provides your employees with a way to save for retirement but also helps you enhance your business’s competitiveness and employee retention. This comprehensive guide aims to unpack everything you need to know about administering a small business 401(k) plan.

What Is a Small Business 401(k) Plan and Why Should You Offer One?

A 401(k) is an employer-sponsored retirement savings plan that enables your employees to set aside a portion of their pre-tax earnings for retirement. You, as the employer, can match these contributions, boosting the size of your employees’ retirement savings.

• Tax Benefits for Small Business Owners . Not only are the contributions you make to your employees’ accounts tax-deductible, but you may also be eligible for a tax credit for the costs to set up and administer the plan. New tax incentives have made it even more financially advantageous for small businesses to set up 401(k) plans.
• Employee Retention and Competitive Compensation . In today’s competitive labor market, offering a robust 401(k) plan can set you apart, making your business a magnet for high-quality candidates. Studies have shown that retirement benefits are among the top considerations for job seekers.
• Personal Savings for Business Owners . It’s easy to overlook your own retirement while handling the day-to-day challenges of running a business. A 401(k) plan enables you to invest in your future by making contributions that are tax-deferred until withdrawal, building your own nest egg.
• Tax Benefits for Employees. Employees gain the ability to save for retirement in a tax-efficient manner. Pre-tax deductions reduce their current taxable income. An employer match serves as an additional financial incentive for employee participation. Offering a retirement plan can also improve financial wellness across the company, which is known to reduce stress and increase productivity.

Setting up a 401(k) for Small Business: Step-By-Step

Choosing the right 401(k) plan requires thorough analysis and expert guidance. A certified financial advisor can evaluate your business’s financial health, provide tailored advice, and help you navigate the complex landscape of 401(k) plans. In a nutshell, we’ll cover the main points you’ll need to consider if you want to self-manage your plan.

Determine Which 401(k) Plan You Want to Offer

Understanding the distinct types of 401(k) plans is crucial for selecting the one that’s the perfect fit for your business.

• Traditional 401(k) : This option offers high contribution limits and flexible employer contributions but requires annual testing to ensure compliance.
• Safe Harbor 401(k) : This is an excellent choice for small businesses looking for a plan that’s easier to manage in terms of compliance. Mandatory employer contributions may be a drawback for you, but it can help you attract and retain employees.
• SIMPLE 401(k) : Specifically designed for small businesses with fewer than 100 employees, this plan type has lower contribution limits but also fewer administrative burdens.

Plan Administration

Administering a 401(k) plan involves several tasks, from ensuring compliance with federal regulations to educating employees about their investment options. Hiring a plan administrator instead of self-managing your plan is often an excellent investment.

• Self-Administration:  If you opt to administer the plan yourself, you’ll be responsible for record-keeping, compliance with federal regulations, employee education, and ensuring timely contributions and distributions.
• Outsourcing:  Contracting a specialized plan administrator can lift the burden of these duties, allowing you to focus on running your business.

Whether you self-administer or outsource, remember that you hold a fiduciary responsibility to act in the best interests of your employees by ensuring the plan’s effective management.

The Nuts and Bolts of Self-Administering a 401(k) Plan

If you opt to self-administer your small business 401(k) plan, the responsibility for compliance, record-keeping, and a slew of other administrative tasks falls squarely on your shoulders. This route can be cost-effective but also incredibly labor-intensive, with a range of compliance intricacies. Below is a deeper dive into what you need to know.

• Record-Keeping. One of your key responsibilities as a self-administering employer is to maintain accurate records. This includes tracking employee contributions, employer matches, investment gains or losses, and distributions. Failure to maintain these records can result in severe penalties from the IRS and the Department of Labor (DOL).
• Employee Notifications and Education. Federal law mandates that you furnish employees with certain disclosures:
• Summary Plan Description (SPD):  This document outlines the benefits, rights, and obligations of participants in simple language.
• Summary Annual Report (SAR):  A yearly financial summary of the 401(k) plan.
• Individual Benefit Statements: Quarterly or annual statements that detail the individual employee’s account activity.

Additionally, consider organizing informational sessions to help employees understand the nuances of their 401(k) investment choices and how to make changes to their contributions.

• Timely Contributions. The law stipulates that you must deposit employee contributions “as soon as they can be segregated from the employer’s assets, but no later than the 15 th business day of the month following the payday.” Delayed deposits can result in penalties.
• Regular Testing. Certain compliance tests ensure that the benefits of your 401(k) plan are not disproportionately skewed towards higher-income employees:
• ADP and ACP Tests:  Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests measure the fairness of deferrals and contributions among different groups of employees.
• Top-Heavy Test:  This test evaluates if key employees own more than 60% of plan assets.

If your plan fails these tests, you’ll need to take corrective actions like refunding excess contributions to higher-earning employees or making additional contributions for lower-earning employees.

Compliance Watch-Outs

As with most things HR and payroll, you’ll need to keep a close eye on a few things:

• Non-Discrimination Rules. As we mentioned previously, you need to be aware of the regulations that ensure your 401(k) plan does not discriminate in favor of highly compensated employees or owners.
• Investment Oversight. You’re responsible for the selection and monitoring of investment options. Poor choices or excessive fees can lead to legal consequences under your fiduciary duties.
• Form 5500. You’ll need to file Form 5500 every year to report financial conditions, investments, and operations. Failure to file or late filing can result in steep fines from both the IRS and DOL.
• Fiduciary Responsibilities. The Employee Retirement Income Security Act (ERISA) imposes fiduciary duties on plan administrators. You must act solely in the interest of the plan participants and their beneficiaries. Failing to do so can open the door to lawsuits and regulatory actions.
• Required Minimum Distributions (RMDs). As plan administrator, you’re responsible for initiating required minimum distributions for all 401(k) account holders starting at age 72. Failing to do this can result in a tax penalty of 50% of the amount not distributed as required.
• Plan Audits. If your plan has 100 or more participants, an annual audit by a qualified independent accountant is generally required. Failing to meet audit requirements can lead to plan disqualification.

By giving due attention to these factors, self-administering a 401(k) can be a rewarding endeavor that adds substantial value to both your business and your employees. However, given the complexities and risks involved, you may want to consult regularly with a tax advisor or a certified financial planner specialized in retirement benefits.

Contribution Limits and Rules

Employee Contributions

• Annual Contribution Limits : The annual limit is subject to periodic updates by the IRS. For 2023, the limit is $22,500 or $30,000 if the employee is 50 or older.
• Catch-Up Contributions : Employees over 50 can make additional contributions, which for 2023 is set at $7,500.

Employer Contributions

• Annual Employer Match Limits : Total combined 401(k) plan contributions by the employee and employer can’t exceed $66,000 ($73,500 for employees who are 50 or older). Total contributions can’t exceed 100% of an employee’s annual compensation.

Employer Matching and Vesting

Employer matching is highly flexible. You can set a flat rate or tier it based on employee salary or years of service. The key is to find a balance that motivates employee participation without straining your finances.

There are generally two types of vesting schedules:

• Cliff Vesting : Employees become fully vested after a specific number of months or years.
• Graded Vesting : Employees gradually become vested over time.

Investment Options

A well-structured 401(k) plan offers a range of investment options to suit different risk profiles and financial goals. The most common are mutual funds, although plans can offer everything from individual stocks and bonds, to target date funds, to real estate investment trusts (REITs).

Costs of Administration

The costs of 401(k) plan administration can vary widely depending on the plan type, the provider, and the range of services offered. While some plans charge a flat fee, others may charge a percentage of plan assets.

• Setup Fees : Initial costs can range from $1,000 to $5,000.
• Ongoing Fees : Expect to pay around 0.5% to 2% of the total plan assets annually.

Disclosing to Employees

It’s essential to educate your employees about their new retirement plan. Workshops, webinars, and one-on-one meetings are useful methods to communicate the ins and outs of their 401(k) options.

Implementing a 401(k) for small business is a win-win. It enables you to offer competitive compensation and flexible work arrangements, while also setting both you and your employees on a path towards financial security in retirement. With careful planning and ongoing administration, a 401(k) can be more than just an employee benefit; it can be a cornerstone of your business’s long-term success.

How Paycor Helps

Secure your employees’ futures with a tailored small business 401(k) plan , while ensuring their well-being. Paycor’s benefits solutions makes the process more manageable by reducing administrative work and mitigating compliance risk.

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Top 10 Small Business 401(k) Plan Providers

Historically, small employers have steered clear of offering 401(k) plans , seeing them as complicated to establish and costly to administer. The rules for running a plan properly are admittedly complex. But increasingly, 401(k) management companies are helping to make the task easier by providing plans geared to the little guys of the business world.

If you are a small business owner considering initiating a 401(k) plan for your employees (and yourself), here are ten of the top retirement plan providers. They not only offer affordable plans but can act as administrators and investment fiduciaries—relieving you of the headache-inducing homework that comes with any plan.

Key Takeaways

• Companies large and small that want to offer their employees 401(k) retirement plans have several options these days to easily and efficiently get one up and running.
• With many providers to choose from, costs have dropped dramatically, along with added services like plan administration and payroll common.
• Here we list ten of the top 401(k) plan providers that serve small businesses.

ADP's 401(k) plans offer investment options from more than 300 investment managers. Three investment line-ups are available for participants, based on their familiarity with investing and financial assets.

In addition to retirement plans, ADP specializes in payroll , tax filing, HR , insurance and administrative services. ADP’s small business division (1 to 49 employees) provides integration of payroll and recordkeeping with 401(k) plans, an important benefit for small employers.

Employees with existing 401(k) accounts have the option to transfer those plans into the new plan, and a mobile app lets employees check their retirement accounts from their smartphones and other devices.

With more than 360,000 retirement plans overall, American Funds provides 401(k) account options that can be tailored to any size company, including startups and those that have recently merged or made acquisitions.

Their plans include both traditional and Roth versions. Investment choices can be target-date focused or a mix of individual mutual funds.

A newer player, Betterment for Business started offering its 401(k) plans to smaller businesses in 2016.

As a robo-adviser , Betterment addresses many of the cost issues associated with the administration and management of a company 401(k) plan by using proprietary algorithms. In addition, Betterment says it eliminates fee hiding by using  exchange traded funds (ETFs) . 

Schwab designed its Index Advantage 401(k) plan to “lower costs, simplify investing and help workers better prepare for retirement,” to quote the company literature.   The key is in the title: The plan uses index mutual funds or exchange traded funds (ETFs) with low operating expenses instead of actively managed mutual funds. Schwab claims operating expense savings by as much as 82%.  

Plans have no annual fees and participants get full access to all of Charles Schwab’s brokerage and banking services, including an interest-bearing, FDIC -insured savings account through Schwab Bank.

Automatic enrollment is available and employees can get help or use a self-directed brokerage account .

Edward Jones offers small employers a variety of options when it comes to investments in its 401(k) retirement plans.   They include stocks, bonds, mutual funds, and government securities .

The company offers education and administrative support to both business owners and employees. After the plan is established, employees can review their accounts online or through mobile apps made available by Edward Jones. 

Employee Fiduciary comes out of the gate offering to let business owners compare their current providers’ 401(k) fees to Employee Fiduciary fees. And indeed, Employee Fiduciary has very low fees. It costs just $500 to start a new plan or $1,000 to convert an old one. Small employers pay $1,500 a year for up to 30 employees plus 0.08% of assets under management .

Employees have access to 377 mutual fund families (including Vanguard), all available ETFs and even a brokerage window through Charles Schwab.

Despite its low fees, Employee Fiduciary offers all the services of a full-price provider: tax return forms, annual report summaries, and benefit statements.

Fidelity Investments has consultants to help business owners select a plan and then, once the plan is established, provides access for employees and owners via the internet.   The company also offers a mobile app that allows employees to monitor their individual accounts.

Employees can transfer old retirement accounts into their new 401(k). Fidelity provides integration with payroll services, an advantage for small-business owners, as well as the full roster of services (plan administration, record-keeping, trading, and investment advisory).

Merrill Edge lists streamlining, convenience and affordability as key advantages to its small business 401(k) plan. Also included are the usual benefits— tax deductions for the employer, investment fiduciary support, and educational support for employees.

With an annual asset-based fee of 0.52%, Merrill boasts pricing that is lower than many competitors. Its plan includes online account management—a common feature in most 401(k) plans. An automatic enrollment option, as well as a Roth 401(k) option, are also available. Employers have the flexibility to contribute on a year-to-year basis.

ShareBuilder 401(k) has retirement plans specifically designed for small employers. There are four different 401(k) options—individual, simplified, customized, and tiered profit sharing.

Each plan has distinct matching, vesting , and profit-sharing options and once the plans are established, employees are able to transfer existing retirement accounts into their new 401(k) account. In addition, ShareBuilder retirement plans integrate with the majority of payroll providers. 

Advertising its small business 401(k) plans as appropriate for companies one or more employees and less than $5 million in plan assets, T. Rowe Price says it offers a “cost-effective structure” for both sponsors and participants.

Investment options include a range of T. Rowe Price and non-T. Rowe Price investments. There is a plan sponsor resource center as well as 24/7 website access for participants. Sponsors may select from over 5,000 funds.

Of course, nothing replaces due diligence and good old-fashioned homework when it comes to checking out various 401(k) plan providers. Make sure you ask enough questions and more important, the right questions when considering a 401(k) plan for yourself and your employees.

ADP. " 401(k) Retirement Plans That Meet Your Business Needs ."

Capital Group American Funds. " 401(k) Retirement Plans ."

PR Newswire. " Betterment for Business Officially Launches and Announces Advisory Board ."

Charles Schwab. " Charles Schwab Launches Unique 401(k) Plan Solution Designed to Address Barriers to Retirement Saving and Investing ."

Charles Schwab. " A Unique View on the 401(k) ."

Edward Jones. " 401(k) Plans for Your Employees ."

Employee Fiduciary. " Employee Fiduciary 401(k) Fees are Low and 100% Transparent ."

Employee Fiduciary. " Low Cost 401(k) Investments ."

Fidelity Investments. " 401(k) for Small Businesses ."

Merrill Edge. " Small Business 401(k) ."

ShareBuilder 401K. " Products & Pricing: Overview ."

T. Rowe Price. " Small Business 401(k) ."

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As we focus on areas where we can provide the highest value, we want to be sure your small-business plan thrives. Ascensus was founded more than 40 years ago with a singular purpose—to help people save for what matters. As an industry leader, they provide versatile capabilities, insights, and experience to meet your plan’s needs.

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As a leading provider of tax-advantaged savings and retirement solutions, you’ll benefit from Ascensus’s extensive retirement experience through all stages of your financial journey.

Ascensus’s market insights and educational resources—along with dedicated professionals serving small-business plans—will provide support for your personal and business success.

Delivering streamlined digital experiences with the needs of small businesses in mind, Ascensus's platforms are designed to provide flexibility, scalability, security, and cost-efficiency.

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Small business retirement plans made simple

Help your employees prepare for the future with a solution that fits your business., are your employees saving enough for retirement.

Making ends meet and saving for retirement at the same time can be a challenge for today’s employees. Many don’t have a plan or haven’t saved even a fraction of what they would need to retire comfortably. We aim to fix that.

As a business owner, you can help start your employees on a path to a better future. A Simply Retirement by Principal ® 401(k) plan is an easy way for them to save money now with the potential to have it grow over the years so they can enjoy retirement.

Why choose us?

What Simply Retirement by Principal ® can do for you

Setting up a workplace retirement plan isn’t something you do every day. We get it. Maybe you aren’t even sure where to start. Simply Retirement by Principal ® makes it easy to learn more about retirement plans and what’s involved. And when you’re ready, you can use our planner to see what a plan might look like for your business and estimate costs.

Take advantage of SECURE 2.0 Act tax credits to help offset up to 100% of (up to $5,000 per tax year for the first three years for some employers) your first three years of plan startup costs. The benefits of the SECURE 2.0 Act.

Simple selections

Set up your plan 100% online, where and when it’s convenient for you—or call if you have questions. We’ve streamlined the investment selection and simplified the paperwork, too.

Simple pricing

The low, flat-fee recordkeeping pricing makes a 401(k) plan affordable for small businesses. It’s a straightforward cost you can plan for each month.

Simple onboarding

After you purchase your plan, you’ll enroll your employees through the Ubiquity Retirement + Savings ® platform—used by thousands of small businesses across the U.S.

Simple administration

Ubiquity’s user-friendly dashboard will help you manage your plan and save time with features like automated notifications and payroll integration.

Take advantage of SECURE 2.0 Act tax credits to help offset your first three years of plan startup costs. * The benefits of the SECURE 2.0 Act.

Simply Retirement by Principal ® costs

One-time setup fee for bundled plans.

Every month

Recordkeeping fee will be billed to business owners quarterly ($435 plus per-participant fees). Pricing shown applies when working with a third party administrator (TPA). With bundled pricing, the recordkeeping fee is $185 per month ($555 billed quarterly) plus per-participant fees. Custodial fees, investment fees, and financial professional and TPA fees (if applicable) are additional.

Cost savings with flat-fee 401(k) plan pricing

Other 401(k) plans may increase recordkeeping fees to business owners as the total account balances increase. not with the simply retirement by principal ® 401(k) plan. no guessing and no changes as your employees contribute. it’s a predictable model you can plan for..

What would a plan for my company look like?

Backed by experience

Simply Retirement by Principal ® combines more than 75 years of retirement expertise from Principal ® * with the digital technology and services of Ubiquity Retirement + Savings ® . We’ve come together to help make retirement plans a reality for more small businesses.

Ready to explore a 401(k) plan for your business?

Here are the next steps we can take together:.

Answer a few questions to see if this solution fits your needs.

You can share your plan proposal with your team.

Complete your plan purchase and get your login.

Enroll employees and start saving.

Try our planner

Still have questions? We have answers.

What are the tax benefits for starting a new 401(k) plan?

A new enhancement was made to the tax credits intended to help cover the costs for small employers that choose to offer new defined contribution plans. Small employers with 50 or fewer employees can now count 100% (maximum $5,000 a year) of their qualified plan expenses toward the tax credit calculation, allowing more employers the ability to maximize the  tax credit.

What is a 401(k) plan, and how does it compare?

401(k) plans allow employees to set aside a portion of their pay, typically before taxes. Employers can make contributions to the employees’ retirement plan if they choose.

What’s involved in managing a 401(k) plan?

The program automates many of the tasks required, but you’ll still have a few basic responsibilities as the plan administrator. Here’s what you need to know.

Small business growth platform

With a Simply Retirement by Principal ® plan, you have access to Elevate by Principal, a powerful network, resource, and team of people in your corner. From data-driven insights to deep discounts on products and services you use everyday, Elevate by Principal can provide what you need to take your business to the next level.

Intended for plan sponsor use.

Start-up tax credit modification: Small employers with 50 or fewer employees may apply 100% of qualified start-up costs towards the tax credit formula (up to $5,000 per year).

• Applicable to small employers with 50 or fewer employees.
• For employees with 51-100 employees: The credit is phased out by reducing the amount of credit each year 2% for each employee in excess of 50.

1st and 2nd year = 100%, 3rd year = 75%, 4th year = 50%, 5th year = 25%, 6th year = 0%

No contributions may be counted for employees with wages in excess of $100,000 (inflation adjusted). If taking advantage of this tax credit, employer contributions may not also be counted towards “start-up costs” in the start-up tax credit calculation.

*Recordkeeping-fee: Pricing shown applies when working with a TPA. Bundled pricing is a $500 initial setup fee, then $185 per month. Fees paid by the business owner are billed quarterly. Fees paid by participants are deducted monthly from participant accounts. Participant fees are charged if there is a $100 account balance, regardless of whether the participant is active or inactive. Custodial and investment fees are charged against participating employees’ accounts (those vary by investment and range from 0.03% - 0.95%, as of March 31, 2024). If the business owner chooses to work with a financial professional and/or TPA, their fees are also additional and may be billed to the business owner. Financial professional fees may be deducted from participant accounts.

*What’s included: Plan costs are billed quarterly. Custodial and investment fees are charged against participating employees’ accounts (those vary by investment and range from 0.03% to 0.95%, as of March 31, 2024). If the business owner chooses to work with a financial professional and/or TPA, their fees are separate and may be billed to the business owner. Financial professional fees may be deducted from participant accounts.

*Principal: As of March 31, 2024

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Self-employed 401(k)

Self-employed individuals, owner-only businesses and partnerships can save more for retirement through a 401(k) plan designed especially for you.

With Fidelity, you have no account fees and no minimums to open an account. 1 You'll get exceptional service as well as guidance from our team.

Compare all small-business plans

Plan details

Maintaining your plan, 1. key things to know, 2. open your plan and establish account, 3. contribute to your account.

Participants are eligible for withdrawals once a triggering event has been reached. Triggering events include reaching age 59 1/2, disability, and more. For a full list of triggering events see the One-Time Withdrawal — Defined Contribution Retirement Plan form (PDF) . A 10% early withdrawal penalty may apply if you are under age 59 1/2 and taking a withdrawal. Required minimum distributions start at age 73.

A wide range of mutual funds, stocks, bonds, ETFs, and more.

There is no opening cost, closing cost, or annual fee for Fidelity's self-employed 401(k). 1 $0 commission for online US stock, ETF, and options trades.* †

An IRS filing is required when you terminate your plan and in some cases on an annual basis. Please see Maintaining Your Plan  for more information.

The deadline to open a new plan is generally the tax filing deadline (including extensions) of the sponsoring business.

Note: For partnerships and corporations that establish their plan after the business's year end, only the employer profit sharing contributions are permitted for the first year. Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year.

Online, by phone, by mail , through mobile check deposit, by transfer or EFT on Fidelity.com, or via a Billpay Service. Learn more

To fully establish your plan, you'll also need to complete the self-employed 401(k) account application, adoption agreement and trust agreement. Please keep copies for your records, along with the Defined Contributions Retirement Basic Plan Document No. 04.

Online plan establishment is available if you:

• Are establishing a new plan
• Are the plan administrator and plan participant
• Are a US Citizen
• Are naming your spouse as your primary beneficiary if you are married

If you are not eligible for online establishment, you may:

Review, download and save (or print for your records) the following document:

• Defined Contribution Retirement Basic Plan Document No. 04 (PDF)

Review, download, complete, return to Fidelity, and keep a copy for your records the following forms:

• Self-employed 401(k) adopting agreement (PDF)
• Trust agreement (PDF)
• Self-employed 401(k) account application for yourself and each participating owner (including the business owner's spouse, if applicable).

Once you've established your self-employed 401(k) plan and any new account(s), the next step is to contribute to your 401(k).

You can use the Small Business Retirement Plan Contribution Calculator to calculate your annual contributions.

You may contribute to your Self-employed 401(k) through the following methods, provided the plan administrator and plan participant for your plan are the same person:

• Contribute now via EFT on Fidelity.com Log In Required  or from a Fidelity non-retirement account in the name of the plan administrator and used for the business.
• Deposit checks on Fidelity's mobile app using mobile check deposit
• Send a contribution via an external Billpay service

If the plan administrator and plan participant for your plan are NOT the same person, you may send a check with a completed 401(k) Contribution Remittance Form (PDF) . Please follow the instructions on the form.

To set up salary deferral elections

• You can use the sample 401(k) Salary Reduction Agreement Form (PDF) . Fill it out yourself and have each participating owner (including the business owner's spouse, if applicable) fill it out as well.
• Keep this form for your records and do not forward to Fidelity.

To roll over other plan assets

If you already have a retirement savings plan for your business, you may be able to roll over or transfer existing plan assets to a Self-Employed 401(k). Consult with your tax advisor or benefits consultant prior to making a change to your retirement plan.

Assets from the following plans may be eligible to be rolled over into a Self-Employed 401(k):

• Profit Sharing, Money Purchase, and 401(k) plans
• SEP IRAs and SARSEPs
• SIMPLE IRA accounts after two years of SIMPLE participation
• 403(b) and governmental 457(b) plans
• Traditional IRAs

Call a retirement specialist at 800-544-5373 , and say "retirement representative," to get help with a rollover into a Fidelity Self-Employed 401(k).

Contribution deadlines

The deadline for self-employed individuals and owner-only businesses to make both the company profit sharing and employee salary deferral is the business's tax filing deadline, including extensions.

For corporations and partnerships, in the year the plan is established, if it is established after the business's year end, only profit sharing contributions are allowed. In subsequent years, both company profit sharing and employee salary deferrals are permitted.

For the year salary deferrals are to commence, generally participants (including self-employed individuals and spouses of owners if they are also participating employees) must make a written salary deferral election by the business's year end.

• Collapse all

A Self-Employed 401(k) plan is a profit-sharing plan with a salary deferral arrangement, qualified under Internal Revenue Code 401.

Eligibility

A self-employed 401(k) plan may be appropriate for sole-proprietors and other small businesses who have no eligible employees other than owners and spouses of the owners. Individuals with corporations (Corp.), limited liability corporations (LLC), and partnerships may also be able to establish a self-employed 401(k), provided there are no common law employees of the business.

In addition to the business owners, the owners' spouses may participate in the plan provided they are compensated employees of the business.

If the company has common law employees this plan is not appropriate. This plan might not be appropriate if you have ownership interest in more than one business or are a participant in a company sponsored 401(k) or other salary deferral retirement plan. If you are looking for a plan that allows Roth salary deferral contributions, loans, or hardship withdrawals, this would not be an appropriate plan for your business as these features are not offered at this time.

The plan administrator, who is typically the business owner, would be responsible for the administration of the plan, and is required to maintain and update, when needed, all plan records and documents pertaining to the plan. Contributions to and distributions from the plan are also the plan administrator's responsibility. In addition, the plan administrator is responsible for the tax filing that is required for some plans annually and all plans upon termination. Please see Maintaining Your Plan for more information.

Account Opening

If you're setting up a plan and opening an account for someone else or if you'd prefer not to submit documents digitally, please complete the documents below.

You should review the plan documents, brokerage agreement and other materials to ensure this is right plan for you and your business.

To open a Self-employed 401(k) plan, you'll need to complete the following documents:

• Self-Employed 401(k) Adoption Agreement (PDF)
• Self-Employed 401(k) account application (PDF)
• Trust Agreement (PDF)

Complete, sign, and return the Adoption Agreement, the Trust agreement along with the original Account Application(s), to:

• Fidelity Investments
• PO Box 770001
• Cincinnati, OH 45277-0036

Remember to keep copies of these documents for your own records.

Note: For partnerships and corporations that establish their plan after the business's year end, only the employer profit sharing contributions are allowed for the first year. Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year.

A spouse, who is also a compensated employee of the business, may be added to the plan by using the Self-Employed 401(k) account application (PDF) .

Contributions

• Contribute now on Fidelity.com  or on Fidelity's mobile app from an external bank account or from a Fidelity non-retirement account in the name of the plan administrator and used for the business.
• Send a contribution via an external Billpay service.
• By check via email using the Contribution remittance form (PDF)

Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year.

For the year that salary deferrals are to commence, generally participants (including self-employed individuals and spouses of owners (if they are also participating employees) must make a written salary deferral election by the business's year end.

If you have an unincorporated business, you (and your spouse if they are an employee of the business) must make a written salary deferral election before the end of the year. Employees of incorporated businesses must make a written salary deferral election before they can begin deferring from paychecks and that must be before the end of the business’s tax year.

You may use the sample 401(k) Salary Reduction Agreement Form (PDF) . Fill it out and have each participating owner (including the business owner's spouse, if applicable) complete a Salary Reduction Agreement Form if they will be making salary deferral contributions to the plan.

Please keep this form for your own records. There is no need to send a copy to Fidelity.

• Individuals may elect a salary deferral amount up to $22,500 for 2023 and $23,000 for 2024.
• Employers may contribute a profit-sharing amount up to 25% of compensation, with the maximum allowed combined employer and salary deferral contribution amount of $66,000 for 2023 and $69,000 for 2024.
• For participants aged 50 or older, additional salary deferral catch-up contributions are allowed of $7,500 for 2023 and 2024.

Investments

You can select from a wide range of investment options. These include Fidelity and non-Fidelity mutual funds along with stocks, bonds, ETFs, and CDs.

Withdrawals

Participants are eligible for withdrawals once a triggering event has been reached. Triggering events include reaching age 59½, disability, and more. For a full list of triggering events see the One-Time Withdrawal — Defined Contribution Retirement Plan form (PDF) .

If you are under age 59½ and are taking a distribution, a 10% early withdrawal penalty from the IRS will apply. A 20% mandatory withholding would also apply to any distribution that is an eligible rollover distribution. Required Minimum Distributions (RMDs) must begin at age 73.

To process a withdrawal from a Self-employed 401(k) plan, please use the  One-Time Withdrawal - Defined Contribution Retirement Plan (PDF) form. The plan administrator and the participant for the Self-employed 401(k) plan will both be required to review and authorize the distribution from the plan.

Maintaining your self-employed 401(k)

A self-employed 401(k) is a qualified retirement plan for a small business where the only employees are the owner(s) of the business and/ or the spouse(s) of the owner(s) if they work for the business. You shouldn't use this plan if you have any other employees. The self-employed 401(k), in some cases, can offer you the ability to make a larger contribution than other plans. However, it does have extensive administrative and tax reporting requirements that are your responsibility as the business owner and plan administrator. The list below does not cover all of your responsibilities. You may want to consult the IRS or a qualified tax advisor if you have additional questions.

Employer and plan administrator responsibilities

1. establish your plan.

• The deadline to open a new plan is generally the tax filing deadline (including extensions) of the sponsoring business. Note: For partnerships and corporations that establish their plan after the business's year end, only the employer profit sharing contributions are allowed for the first year.
• The employer will establish the plan and name the plan administrator. Typically with the self-employed 401(k), the employer and the plan administrator are the same person, but you may name someone else as plan administrator if you choose.

NOTE: The plan administrator is responsible for making contributions, authorizing withdrawals, preparing and filing the 5500 when necessary, and recording and keeping documents for the plan and updating those documents when necessary.

2. Notify eligible participants of their ability to defer pay into the plan

Eligible participants who wish to defer salary must complete a salary reduction agreement form before the plan's year end. You may use the Salary Reduction Agreement form (PDF) and keep it in your own records.

3. Contribute to the participants' accounts by your business' tax filing deadline plus extensions

• Note: For corporations and partnerships, in the year the plan is established, if it is established after the business's year end, only profit sharing contributions are allowed. In subsequent years, both company profit sharing and employee salary deferrals are permitted. Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year. Sole proprietors must open their plan by their tax filing deadline (no extension) to make both profit sharing and salary deferral contributions in the first year.
• As a plan sponsor, you can make contributions online via EFT from your bank or from an individual account on Fidelity.com . Mobile check deposit is available using the Fidelity's mobile app.
• Sole proprietors and partnerships may choose to use the Small Business Retirement Plan Contribution Calculator or the Self-Employed 401(k) Contribution Worksheet (PDF) to help calculate contributions.

4. Submit withdrawal requests when eligible

• Participants are eligible for a withdrawal once a triggering event occurs, such as turning age 59½, disability, or death. 10% early withdrawal penalty applies if you take a distribution before you're 59½ years old. Required minimum distributions (RMDs) start at age 73.
• There is a 20% mandatory federal withholding requirement for any withdrawal that is otherwise eligible to roll over to another plan.
• Withdrawals are done in writing using the Defined Contribution Retirement Plan One-Time Withdrawal form (PDF) .
• RMDs are generally required the year you turn 73 years of age for self-employed retirement plans, regardless of your working or participation status. You may set up recurring RMDs using the Defined Contribution Retirement Plan - Automatic Withdrawals form .

5. Abide by the Defined Contributions Retirement Plan document (PDF)

• This document contains the IRS-approved rules for your plan, as well as a definition of terms.
• Important Information regarding your Defined Contribution Retirement Plan: Participation in a 401(k) arrangement has changed with the passing of the SECURE Act and the SECURE Act 2.0. Beginning in 2021 the strictest age and service requirements that can be applied to an employee before the employee can participate in a 401(k) arrangement are: 1) at least 21 years old and the date completing 1 year (12 months) and no less than 1, 000 hours of service or 2) completing 3 consecutive years (36 months) of service with at least 500 hours of service or more each year provided the employee has attained age 21 by the close of the third year. The later could make 401(k) deferrals under the plan available to certain part-time employees starting 1/1/2024. Beginning in 2023, the SECURE Act 2.0 reduces the 3 year rule to 2 years. This could affect employees starting 1/1/2025.

6. Keep good records

Starting with the forms you fill out to establish your plan, you'll want to keep a file of all relevant documents. This is not a comprehensive list, but among the important documents you will need are the plan document, the adoption agreement, records of all contributions and distributions, and any corrections of errors of operation, should they occur. Over the life of your self-employed 401(k), you may have reason to amend your adoption agreement. You should keep any older versions, along with the most current version. You may operate under different versions of the plan document, and you should keep a copy of all versions. Note: Fidelity doesn't retain any of these records on your behalf.

7. Update your records

• Any change in your plan that would alter information on your adoption agreement requires you to fill out a new adoption agreement, amending your plan. Substantial changes could result in a termination of the plan. If you are unsure whether you should amend or terminate your plan, please see your tax advisor.
• The plan document itself is updated for legislative changes every 6 years. Once Fidelity makes the changes to the plan document and they are approved by the IRS, you'll need to restate your plan. That will require an amended adoption agreement and a new plan document.

8. File the version of the 5500 that's appropriate for your plan

• Most owner-only plans can file the 5500EZ after plan assets exceed $250,000 but consult the IRS or your tax advisor if you are unsure of which version of the form applies to you.
• See Understanding form 5500 for more information and help with the filing.

9. Correct errors of operation

• The profit-sharing excess which cannot be removed from the plan. The IRS remedy is to "carry forward" the excess and apply it to a future year. Penalties may apply.
• An excess salary deferral, which must be removed by 4/15 after the year the excess was deferred.
• If you believe you have contributed more than you should, please consult your tax advisor. If you have questions, our retirement representatives may be able to help. Please call 1-800-544-5373 and say "Small Business Retirement plan." Please be aware, our representatives are not tax advisors.

10. Terminate your plan

• An active plan should have substantial and recurring contributions. If you are ready to terminate your plan please see the. Self-employed 401(k) Termination Guide (PDF)
• Money Purchase Termination Guide (PDF)
• Profit Sharing Termination Guide (PDF)

11. Provide Fee Disclosure information

Your self-employed 401(k) should not be subject to Title 1 of ERISA because it does not cover employees beyond the owners of the business sponsoring the plan (or their spouses). However, you if operate a money purchase or profit sharing plan with common law employees you should be aware of the to keep up to date on fee disclosure regulations for plan sponsors and plan participants.

Fidelity's Responsibility

1. provide the plan document.

Defined Contributions Retirement Plan Document (PDF) is qualified and approved by the IRS and updated as required.

2. Maintain accounts

Fidelity will provide the self-employed brokerage account(s) on our platform and the custodial agreement that outlines the rules and agreement for the account(s). Please see Establish Your Accounts .

3. Provide an Annual Valuation Statement (AVS) for the plan annually

• The AVS is available online and/or mailed annually in late April.
• A detailed explanation is on the Understanding form 5500 page.

4. Prepare tax forms for participants

IRS form 1099-R for each year distributions or rollovers are processed out of an account.

5. Offer planning and investment guidance

• Choose your investments using our exceptional online tools and data. Our experienced representatives can also help you make an informed decision.
• For more information on how we can help you with investment management, planning, and advice, please see What We Offer .

Helpful resources

• IRS 401(k) plan Fix-It Guide
• The Employee Plans Compliance Resolution System (EPCRS)
• I RS 401(k) plan additional resources
• IRS Website
• Understanding form 5500

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$0.00 commission applies to online U.S. equity trades, exchange-traded funds (ETFs), and options (+ $0.65 per contract fee) in a Fidelity retail account only for Fidelity Brokerage Services LLC retail clients. Sell orders are subject to an activity assessment fee (historically from $0.01 to $0.03 per $1,000 of principal). A limited number of ETFs are subject to a transaction-based service fee of $100. See full list of ETFs subject to this service fee here . There is an Options Regulatory Fee that applies to both option buy and sell transactions. The fee is subject to change. Other exclusions and conditions may apply. Employee equity compensation transactions and accounts managed by advisors or intermediaries through Fidelity Institutional ® are subject to different commission schedules.

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options . Supporting documentation for any claims, if applicable, will be furnished upon request.

No account fees or minimums to open Fidelity retail IRA accounts. Expenses charged by investments (e.g., funds, managed accounts, and certain HSAs), and commissions, interest charges, and other expenses for transactions, may still apply. See Fidelity.com/commissions for further details.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

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Tax Advantages of Self-Employed 401(k)s

A Self-Employed 401(k) may substantially reduce your current income taxes because generally, you can deduct the entire amount of your plan contributions from your taxable income each year.

• If your business is unincorporated, you can deduct contributions for yourself from your personal income.
• If your business is incorporated, you can generally deduct contributions as a business expense.

Note: Fidelity also offers a Profit Sharing Plan which lets you contribute the same amount as a SEP-IRA. A Profit Sharing Plan may be better suited for your needs if you have multiple employees and want more restrictive eligibility requirements to participate in the plan. Please contact a Fidelity retirement representative at 800-544-5373 and select option 3 for more information.

Contribution methods depend on the business structure, and include:

• Mobile check deposit through Fidelity's mobile app (account owner must log in)
• On Fidelity.com from an individual account or via Electronic funds transfer (ETF) from a personal bank account (generally only for sole proprietors/owner-only businesses.)
• By check, mailed or deposited at an investor center. View/download contribution remittance form. If funding multiple accounts with one check, please include a spreadsheet with the instructions to split between accounts
• By BillPay from a personal business account used for the business, or a business bank account.
• By phone through a representative from an established Fidelity account used primarily for the business.

See all Self-employed 401(k) FAQs

Important Information Virtual Assistant is Fidelity’s automated natural language search engine to help you find information on the Fidelity.com site. As with any search engine, we ask that you not input personal or account information. Information that you input is not stored or reviewed for any purpose other than to provide search results. Responses provided by the virtual assistant are to help you navigate Fidelity.com and, as with any Internet search engine, you should review the results carefully. Fidelity does not guarantee accuracy of results or suitability of information provided.   Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.   Fidelity does not provide legal or tax advice, and the information provided is general in nature and should not be considered legal or tax advice. Consult an attorney, tax professional, or other advisor regarding your specific legal or tax situation.  Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917  796549.1.0

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ADP 401k Essential for small business

Simple, affordable, and easily customizable retirement plans backed by the experience and service of ADP®.

Help get your employees retirement ready with easy-to-manage retirement plans that can help you meet your fiduciary obligations, attract the best talent to your company and more.

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All the benefits of a 401(k), and we do the work for you

Backed by decades of experience and trusted by over 1 million small businesses, payroll leader ADP offers 401(k) plans that make it easy to provide employees with a retirement benefit.

From our powerful plan dashboard to helpful administrative services like notification delivery and IRS filings, we make it easy.

ADP takes on fiduciary responsibilities for you. This includes both administrative and investment management - so you can stay focused on your business.

Flexibility

Our standard plan fits most small businesses and you can modify eligibility requirements, matching contributions, and more to get a plan that fits you best.

SECURE 2.0 Act Tax Credit Calculator

Discover your potential savings with SECURE 2.0

Offering a 401(k) plan is more affordable for small businesses than ever, thanks to new tax credits introduced by the SECURE 2.0 Act.

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in tax credits over the plan's first 5 years!

Customize your plan with affordable options 1 for

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Small business 401(k) FAQ

401(k) costs vary and fee structures differ from provider to provider. It is best to review each company's offering closely considering both near-term and long-term expenses as well as which fees are paid by the employer and the employee. Differences in pay fee structures can impact the long-term savings potential of the 401(k).

Yes, small businesses can offer a 401(k). There are plans designed for sole proprietors as well as companies with employees and each plan type has its own requirements and features. 401(k) plan providers often offer several options with varying fee structures.

Creating a 401(k) - sometimes called 'sponsoring a 401(k)' - involves a number of steps. Often times a plan provider will handle many of these steps for you. Activities required for establishing a 401(k) include selecting a plan, setting up a trust to hold plan assets, maintaining records of employee contributions and values, and providing information to plan participants. There are other administrative tasks as well like connecting your 401(k) plan contributions to your payroll process.

That depends. A small business owner who is actively involved in the business can participate in the company's 401(k) as an employee - making contributions on behalf of their own retirement savings. However, an owner who is passively involved may not be able to contribute. Consult with a certified financial advisor to better understand your options.

Sometimes. If you are a self-employed member of a small business that operates as an LLC, the IRS allows you to set up a 401(k) plan for yourself. But not every member of an LLC is eligible, as there are some restrictions. For example, the IRS doesn't consider a member’s passive involvement in an LLC as self-employment when no services are provided to the business. Such individuals may not be able to participate in that company's 401(k). Consult with a certified financial advisor to better understand your options.

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Your employees count on you and you can count on ADP. We’re here to help you evaluate your choices and to provide tools and resources that make it easy to offer your own 401(k).

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*Business.com article "Best Business Employee Retirement Plans for 2024" Published May 2, 2024

† This calculator is for illustration purposes only and should not be construed as tax advice. Please consult with your own tax professional for advice.

Monthly Investment Service Fee: ADP Strategic Plan Services, LLC will impose a fee of .10% of covered assets, subject to a minimum fee of $20.83 per month, as more further described below.

The amount of the tax credit each year is limited. Employers with up to 100 employees may be entitled to an annual tax credit for three years equal to 50% of the costs of starting up and administering a retirement plan and for participant education services. Employers with 50 employees or fewer may be entitled to 100% of the costs for these services. The maximum credit is up to the greater of (1) $500 or (2) the lesser of (1) $5,000 or (2) $250 multiplied by the number of non-highly compensated employees eligible to participate in the plan. An additional credit of $500 per year for the first three years is available to plans that offer an automatic enrollment feature that meets the requirements of an Eligible Automatic Contribution Arrangement (EACA) as defined in Internal Revenue Code Section 414(w)(3.) The maximum credit over 3 years of $16,500 is available to plans that cover at least 20 non-highly compensated employees and offer automatic enrollment.

Additionally, an annual tax credit for eligible employer contributions for five years of up to $1,000 per employee earning $100,000 or less may apply to employers with up to 50 employees but phases out from 51 to 100 employees.

The availability and amount of a tax credit depends on your situation. ADP does not provide tax advice, and you should consult with your own tax professional.

• ADP cannot provide tax or legal advice. Clients should discuss with their tax advisor. Only registered representatives of ADP Broker-Dealer, Inc. (ADP BD), Member FINRA, an affiliate of ADP, Inc., One ADP Blvd, Roseland, NJ 07068 or, in the case of certain products, a broker-dealer firm that has executed a marketing agreement with ADP, Inc., may offer and sell ADP retirement products or speak to retirement plan features and/or investment options available in such ADP retirement products.
• Strategic Plan Services, LLC (SPS) is an SEC Registered Investment Adviser. SPS will assess an annual fee for its investment management services equal to 0.10% of Eligible Assets, subject to a monthly minimum as described in the following sentence. This annual fee will be billed monthly, will be subject to a monthly minimum of $20.83. ADP will collect this fee on behalf of SPS and will calculate this fee for each billing period by multiplying (1) the average daily balance of your Plan’s Eligible Assets as reflected on ADP’s recordkeeping system for the billing period, times (2) the Daily Rate (0.10% divided by the number of days in the calendar year), times (3) the number of days in the billing period. The average daily balance of Eligible Assets for each billing period will be reflected on your invoice. Eligible Assets include all Plan assets except (1) those invested in Plan Sponsor Investment Options (as defined in your Investment Management Agreement) and (2) any outstanding participant loan balances (for this purpose, outstanding participant loan balances include outstanding loans that have been deemed distributed under Internal Revenue Service regulations and any accrued interest on such deemed distributions). ADPRS-20230609-4582
• Prices vary based on customization.
• All data and information shown is for illustrative purposes only and is not representative of any plan or participant. Assumes $3,000/year contribution and 7% annual return.

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Small Business 401(k) Plans: What to Know About Employee Retirement Plans

Table of Contents

If you’re considering offering employee benefits , there are few perks workers desire more than a 401(k) retirement plan. As such, many employers use robust retirement plan options to attract and retain quality employees. We’ll explain why a 401(k) plan is a popular choice for business owners and employees and explain how to set one up with a top provider. 

What is a 401(k) plan?

A 401(k) plan is an employer-sponsored benefit that allows employees to save money for retirement. According to the IRS, a 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. Employees typically have several choices for the types of investments the money is put into.

How do 401(k) plans work?

These retirement plans are straightforward: 

• A business offers a 401(k) plan to its staff. 
• Employees sign up and designate a percentage of their paycheck to be placed into their retirement investment account. 
• The money will grow – often significantly – throughout the employee’s career to help fund their retirement.

Eliza Guilbault, vice president of workplace consulting thought leadership and commercialization at Fidelity, says most workers are responsible for funding their own retirement in the current workplace environment. “We are shifting from an employer-funded pension plan to a defined contribution plan landscape,” Guilbault explained. “A 401(k) is a great way to save for the future.”

While employers sponsor these plans, the investment money belongs to the employees. The money they contribute to their account is theirs to take if and when they move on to a new job. 

What is 401(k) matching? 

To boost participation, employers sometimes contribute to their employees’ 401(k) accounts based on each employee’s contribution. They may entirely or partially match an employee’s contribution up to a specific percentage. For example, if an employee contributes 4 percent of their paycheck, their employer might match that contribution, essentially doubling the employee’s contribution. 

Employers may implement a vesting period that dictates how long an employee must stay with the organization before the matching contributions fully belong to them. Implementing a vesting schedule helps incentivize employees to stay with the company. 

How much can employees contribute to a 401(k)?

As of 2024, an employee can contribute up to $23,000 annually. If a business owner matches the investment, the contribution amount cannot exceed $69,000 per year. Those age 50 and older can contribute an additional $7,500.

What are the types of 401(k) plans?

There are a few types of 401(k) plans, including the following popular ones: 

• Traditional 401(k)s: In a traditional 401(k) plan, the money an employee chooses to invest in the plan is pretax. In other words, the money they contribute comes out of their paycheck before taxes are deducted. However, they will pay taxes on the money when they withdraw it from their retirement account.
• Safe harbor 401(k): A safe harbor 401(k) is similar to a traditional 401(k) but lets business owners avoid mandatory compliance tests if the company makes specific mandatory contributions. 
• Roth 401(k): With a Roth 401(k) plan, money comes out of an employee’s paycheck after taxes have been deducted. Because the taxes were paid upfront, employees won’t pay taxes on the money when they withdraw it. It’s a popular option for employees who aren’t concerned about immediately reducing tax liabilities and want to grow assets tax-free over time.

What are the benefits of offering a 401(k) plan to employees?

While offering a 401(k) plan allows employees to save pretax dollars for retirement, it also brings  significant benefits to a business, including the following:

• Offering a 401(k) plan increases employee loyalty. Employees feel more loyal to an employer offering a 401(k) plan, particularly one that contributes matching funds. Loyal employees fuel a workplace with increased employee retention and satisfaction.
• Offering a 401(k) plan helps you attract top talent. Businesses can attract and retain top talent by offering perks like 401(k) plans and a robust employee benefits package that includes health insurance . “I think it is really important, if you are trying to grow your business, to think through offering a 401(k) plan and what that can mean to attracting and keeping talented employees,” Guilbault advised.
• Offering a 401(k) plan lowers company taxes due. Employer contributions to employee 401(k) plans are tax-deductible, which helps the company financially. Some businesses may even qualify for tax credits. 
• Offering a 401(k) plan helps business owners. When there’s a 401(k) plan, business owners can contribute significant money toward their own retirement. They can better plan their future and ensure their financial security.

How do I set up a 401(k) plan for my business?

While a 401(k) plan is a benefit traditionally offered by larger organizations, Fidelity’s Guilbault says small businesses should strongly consider offering one too. “Many [retirement plan] providers have solutions that are great for small businesses,” Guilbault noted. “Fidelity works with thousands of small businesses.”

To set up a 401(k) plan for your business, take the following steps: 

1. Select a 401(k) plan provider.

Numerous dedicated retirement plan providers exist. Additionally, the best online payroll services and the best professional employer organizations often provide 401(k) plan management in addition to their core services. 

For example, Gusto is a multifaceted platform that offers payroll, employee benefits and human resource management software. Its payroll services can easily and accurately accommodate 401(k) contributions and matches. Read our review of Gusto HR software and our Gusto payroll software review to learn more. 

2. Check state regulations regarding retirement plans.

States have various rules and regulations about retirement plans. Some states even require employer-sponsored retirement plans. For example, in California, if your business has even one employee (who isn’t the owner), you must offer a retirement plan that meets specific criteria. Businesses can register with the state’s CalSavers program to access retirement plans or create their own employee retirement plan. 

Every small business owner should research their state’s rules. 

3. Decide what 401(k) plan features you want.

401(k) plans have various features and functions, so business owners must make some decisions. Consider whether you want any of the following: 

• Automatic enrollment: You may want to implement an automatic 401(k) enrollment policy, where each employee is automatically enrolled in the 401(k) plan at a specific savings percentage unless they opt out. Automated enrollment can lower the overhead costs of providing this benefit and make it easier for employees to maintain it.
• Matching contributions: You’ll need to decide whether you want to match contributions. While matching isn’t a requirement, Guilbault says it could pay off in the long run. “A well-designed 401(k) plan, with a company match and that incentive, can really help keep people and attract the right people [a business is] looking for,” Guilbault advised. Matching contributions is a significant employee perk that incentivizes employees to save more. However, it’s not a viable option for businesses that aren’t profitable or must cut business expenses . 
• Professional management: When you provide professional management for your retirement plan, employees can access a financial advisor who will help them with fund selection and contribution amounts.

4. Determine your 401(k) plan costs.

For small businesses, the costs of offering a 401(k) retirement plan can vary greatly.

• Setup and maintenance costs: Plan providers typically charge setup and maintenance fees. Setup costs can range from $500 to $2,000, while maintenance fees are usually based on the number of participating employees. Annual administration fees can range from $750 to $3,000. The plan’s assets, the employer or the participants’ accounts may cover administrative fees. 
• Plan add-ons: Additional plan features, including automatic enrollment, increased fund options and professionally managed services, will add to your costs. 

While providing a 401(k) plan incurs costs, some expenses may be offset by specific tax deductions for which small businesses with fewer than 100 employees may be eligible. For example, you may be able to deduct administrative fees from your business taxes. You may also be able to take advantage of tax credits.

What are 401(k) alternatives for small businesses?

A 401(k) is not the only option for small businesses looking to establish a retirement plan for their employees. Business owners should also consider SEP and SIMPLE IRA plans as potential alternatives. 

• SEP IRA: A Simplified Employee Pension (SEP) IRA allows employers to put away up to 25 percent of their income to save for retirement. Business owners can establish these funds for themselves and their employees. SEP contributions must be made by the employer on behalf of the employee; there are no employee contributions. 
• SIMPLE IRA: A SIMPLE IRA is a retirement plan that allows employers and employees to contribute to an employee’s retirement savings. In a SIMPLE IRA, an employer must match up to 3 percent of an employee’s annual compensation or make a 2 percent non-elective contribution for employees, with an annual limit of $345,000 for 2024.

What are the top employee retirement plan providers?

The best business employee retirement plans will help you provide your employees with competitive benefits at a price you can afford. The following options are excellent choices for small businesses getting started with retirement plans:  

Human Interest

Human Interest is an affordable provider with minimal investment fees and low monthly employer and employee fees. Its flexible retirement plans can be customized to address an employer’s specific needs. Read our Human Interest review to learn about its plan administration functions, employee onboarding features, and top-notch customer service.

ADP is a popular payroll provider that also offers 401(k) account administration. Businesses can integrate with ADP payroll to make processing contributions automatic and easy. Employers will also appreciate ADP’s mobile app, which helps employees easily enroll in a plan and check their funds’ performance. Our review of ADP explains this platform’s unique features, including a dedicated manager to help you set up your plan.

Paychex offers traditional 401(k) plans, owner-only 401(k) plans, solo 401(k) plans and SIMPLE IRAs. Business owners can customize their plans based on their company’s needs. If you use Paychex for payroll and other HR services, layering in retirement savings is seamless. Our Paychex Retirement Services review highlights the platform’s self-serve interface, which lets employees log in to monitor their balances and manage their contributions.

USA 401k keeps it simple with two choices: a safe harbor 401(k) and a traditional 401(k). Information about each option is readily available on the company’s website, making it easy for a business owner to decide what they need. We like that, during enrollment, employees can speak to a licensed representative for individualized guidance. Our USA 401k review explains how the platform offers fiduciary services for its more than 15,000 investment funds and even lets plan participants invest in individual stocks and bonds. 

ShareBuilder 401k

In addition to solo, safe harbor and traditional 401(k) plans, ShareBuilder also offers a tiered profit-sharing 401(k) plan. This plan provides a low-cost retirement planning solution with below-average investment fees of only 1 percent and additional savings as your employees save more money. Our ShareBuilder 401k review explains how employees can choose from five managed portfolios or build their own from ShareBuilder’s low-cost index funds.

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