Choosing a 401(k) Provider for Small Businesses


When you make choices as a small-business owner, their impact is arguably greater than it would be if you owned a large business. While large businesses must run as smartly and efficiently as any other business, their sheer size can sometimes make it easier for them to absorb a loss or survive the fallout from a less-than-optimal decision. That’s why when you’re considering sponsoring a 401(k) program at your small business, it’s critically important to select the right 401(k) provider for you. But how should you decide? Read on to find out.

What Are You Looking For?

While this is a broad question, and you may think the right answer lies outside your area of expertise, it is still important to consider before you start your search. What made you decide that now is the time to consider sponsoring a 401(k) plan? Did your employees request it? Did you lose a few good employees to competitors that offered better benefits such as a 401(k) plan? Have you always wished you could do it but never thought you could afford it? 

Understanding your motivations will help you narrow your focus and better determine what you are hoping to achieve by making this change.

At the very least, compile some basic information about your workforce, such as how many eligible employees you expect to have and other important demographics such as their ages (how close to retirement they are can matter), their income (contributions are often done in percentages, and if you’re offering matching contributions, your employees’ salaries will help determine how much you pay out) and other relevant information.

If you’re near the 100-employee mark, maybe do an informal poll to find out how many employees would participate if you offered a 401(k) plan. Having 120 or more plan participants can trigger the need to perform annual audits, unless you go with a Safe Harbor plan. At the same time, depending on the type of plan you choose to offer, having high employee participation can be beneficial, since the more employees you have in the plan, the more you and your highly compensated employees can contribute to your own retirement savings.

It can be difficult for many small-business owners to determine ahead of time what type of 401(k) plan they want to sponsor. That’s because you may not know much about what your options are. Reading up on all of them until you are adequately informed could take months, and you want to put your time and effort into your business. At the same time, you don’t want to shirk the responsibility that comes with making decisions about your employees’ retirement plans.

One great option for quickly getting the information you need is to consult a financial advisor. If you don’t already have one, however, the search to find a good one might not be that different from your search for a 401(k) plan provider. What you definitely want — whether it’s a financial advisor or a 401(k) plan provider, is someone who knows their stuff.

How to Refine Your Search for a 401(k) Provider

The way many people make important decisions in life is by relying on their network for advice. Whether that’s work associations, personal friends, family members or others, getting a recommendation is a great place to start. While it can be useful to do research on third-party review sites, the information you get there should always be taken with a grain of salt. Dissatisfied customers are always more motivated to post than satisfied ones, and some people are always dissatisfied no matter what. When you start with a recommendation from someone you know and trust, you’re in a better position.

Once you get a few names, do your own background checks on the ones you like, seeing if they are properly certified and accredited, and if there are any complaints against them on sites like the Better Business Bureau. Check their ratings on review sites like G2, and dive into the details.

Like with any other selection process, set up appointments with the 401(k) providers you are considering. Be sure to ask about what types of plans they recommend for you based on your wants and needs for your company and employees — hopefully the answers will be about the same from each one, and you will get a better understanding of what is right for you. Then you can find out about what types of features and customization services they offer (such as investment options and fund choices), and this could be the clincher. Remember to ask about their cost and fee structure as well — administrative fees, investment fees and other charges can add up.

We offer a buyer’s guide to help you compare 401(k) fees — just ask!

Other Considerations with 401(k) Providers

You may also want to ask potential 401(k) plan providers about the type of technology they use and how easy it would be for you and your employees to use their features to manage your accounts. Additionally, you may want to determine the level of support you can expect to receive with respect to using mobile access, record-keeping and reporting, compliance and any other aspect of plan administration you may be concerned about.

Many small-business owners are drawn to 401GO because setup is so easy and fast, and administration is a snap. We have been around since 2018, and you can read about us in U.S. News & World Report, among other publications and review sites. 

Could 401GO be right for your small business? Give us a call and find out!

Secure your future today. Enroll in your 401(k) plan now.

Dillon Hunt
Dillon is a Senior Plan Consultant and hobby farmer. He enjoys financial topics and helping clients achieve their financial goals.
Secure your future today. Enroll in your 401(k) plan now.