3 Reasons You Shouldn’t Be Nervous to Start a 401(k)

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While 401(k)s offer substantial benefits, both to businesses and employees, many owners are nervous about starting a plan for their business.

And why not? 401(k)s have traditionally come with high costs, significant time requirements, and compliance concerns. And, they’re not easy to shut down if you are unhappy with the results.

But, traditions are changing, and fintech platforms are transforming the way businesses approach retirement benefits. What used to be a luxury reserved exclusively for large businesses is now available to everyone, regardless of size. As a result, this new generation of 401(k)s has been a game-changer for small businesses, allowing them to attract, retain, and compete for top talent like never before.

Here are three reasons you don’t need to be nervous to start a 401(k).

Reason 1: Costs are affordable

As a small business owner, you have to be cost-conscious. 

And for many, fears of high costs are holding them back from establishing a 401(k) for their small business. But if you think 401(k)s are only for big employers with deep pockets, think again. While that may have been true in the past, times have changed. 

In general, small business 401(k) costs can be broken into three categories:

  1. Startup Costs. These costs cover the initial setup, plan design, and implementation. 
  • Legacy providers: $500 to $1500
  • 401GO: $0
  1. Employer matching contributions or profit sharing (optional). Most employers offer a matching contribution depending on how much an employee contributes. This is optional and varies by plan design.
  • Legacy providers: Varies by the plan
  • 401GO: Varies by the plan
  1. Plan administration fees and expenses. These costs cover the plan’s ongoing reporting, administration, and day-to-day operation. 
  • Legacy providers: $750 to $3,000 per year, plus $15 to $60 per participant per year.
  • 401(GO): $4 to $9 per participant per month, with discounts for 50+ employees

Legacy 401(k) providers may charge thousands of dollars for setup and administration, but at 401GO, we’ve lowered costs significantly by automating (almost) everything and bundling our services, so you only deal with one provider. This allows small business owners to offer their employees a 401(k) without the burden of high costs and fees.

This has made 401(k) plans for small businesses more affordable than ever, eliminating the cost barrier.

Reason 2: Time requirements are minimal

Next, many small business owners worry about the time commitment of establishing and running a 401(k).

As an owner, time is precious. You’re constantly juggling various tasks, each with different priority levels, all in a limited amount of time. Unfortunately, this causes many owners to forego a 401(k) altogether because they simply don’t have time. But, through automation and technology, 401GO has drastically reduced the time commitment for small business owners.

The industry standard of 4-6 weeks for plan setup is now a relic of the past. 

At 401GO, our automated system takes you from start to finish in as little as 15 minutes. We’ve removed the time barrier to 401(k) plans by streamlining the process and eliminating the need to negotiate with multiple service providers. And, with our menu of plan design options, owners can be up and running in no time.

Reason 3: Compliance is handled

Offering a 401(k) creates compliance concerns.

At a high level, the federal government wants to ensure retirement plans are following certain rules and regulations outlined by the Employee Retirement Income Security Act (ERISA).  ERISA provides protection for participants and holds plan managers to certain standards and fiduciary requirements. 

For example, your 401(k) plan will have specific employee eligibility requirements. Once those eligibility requirements are met, it’s your responsibility to allow the employee to participate in the plan, and failure to do so could result in penalties or fees. At 401GO, we streamline this process by automatically notifying employees once they’re eligible to participate and making the sign-up process a breeze.

In addition, employers have certain tax forms and filing requirements, such as form 5500, that must be taken care of annually. Form 5500 is a fairly involved tax reporting document, and if filing requirements aren’t met, the IRS may charge a penalty of $250 per day, and ERISA may charge $2259 per day for late filing.

But, at 401GO, our technology completes, signs, and files form 5500 on your behalf, identifying any red flags and working quickly to address them. This is one of the many ways we simplify your compliance concerns.

In addition, through payroll integrations and task automation, our typical business owner only spends around 10 minutes per year taking care of their plan administration and compliance.

Setting minds at ease

At 401GO, we provide small business 401(k) plans powered by an easy-to-use platform. Our streamlined approach allows you to get up and running in just minutes with simple and affordable pricing to fit your unique business.

Learn more about our 401(k) options optimized for small and medium sized businesses.

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Jennifer Stott
Jen is experienced at creating and managing marketing content and blogs. She enjoys communicating about this complex industry.

Learn more about our 401(k) options optimized for small and medium sized businesses.

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