401k plan cost

Retirement plans can be intimidating and confusing for business owners that haven’t used them before. Old plans were bulky, often cost-prohibitive for smaller employers, but the new generation of 401(k) plans are much more affordable. 

So affordable, in fact, they can be game-changing for the little guys, and allow them to compete in the job market as never before. This is an absolute necessity for businesses in some states where retirement plans are mandated.

Start-Up Fees

401(k) providers typically charge a one-time setup fee of around $500-$1500. This covers the time it takes to create the plan documents, add participants to the plan, and prepare for upcoming administration.

401GO setup fees are zero.

Employers must also take time up front to educate employees about the new plan, and help them either get set up, or opt out. Plan providers can usually provide employers with detailed materials, but the dissemination of these materials, as well as answering questions, is handled by the business owner or HR manager.

The 401GO platform automates the setup process for both employers and employees, so it takes very little time for anyone. This technology allows us to offer setup at no cost whatsoever.

Employers should also note that they can take advantage of a startup tax credit of up to $500 for 3 years, which can help offset initial costs.

Management Fees

The cost of the day-to-day running of a 401(k) plan is typically broken into three categories:

  • Administration: this includes preparing and filing records, accounting, compliance testing, sending notifications, providing customer service, and so forth.
  • Investment: expenses associated with managing the plan investments are charged to the participants (not the employer) as a percentage of the total assets in the fund. 
  • Service: it may cost extra to take a hardship withdrawal or loan, or to perform a profit-sharing calculation.

These fees can be tricky to understand and compare, because the tasks may be split between different parties, and because each provider may have unique methods of calculating fees. 401GO is a bundled solution, meaning we serve as recordkeeper, TPA, and custodian. 

To get a complete chart of comparison points, see our buyer’s guide.

Contribution Costs

Depending on the type of 401(k) being used, contributions may or may not be required.  Although most employers do choose to offer matching funds, we find many small businesses are surprised to find this cost to be lower than expected. 

It’s important to note that while this is a real cost for employers, it is not a cost that varies based on the plan provider. It only varies based on the plan design, number of participants, and the amount those participants contribute. 

Typically contributions are tax deductible, so many employers are happy to give this money to their employees and reduce their tax burden.

Other Fees

While other fees are not always hidden, they can be easily overlooked and give employers a nasty surprise if they are not prepared. Before investing in a new 401(k) plan, ask about these possible additional costs:

  • Administration fees: for rollovers, loans, transactions, changes, or withdrawals
  • Investment and advisory fees: for investment design, execution and monitoring, and advising participants
  • Trustee service fees: for assuming some liability and holding plan assets 
  • Recordkeeping fees: tracking participation, individual account information, and amounts invested in each fund
  • Reporting fees: for preparation, filing, and assumption of liability for the accuracy of the reports
  • Termination fees: for closing a plan and transferring assets to a new provider

401GO has designed pricing to be affordable. See our pricing page for a full list of services included in our price.

The Savings Are in the Technology

Technological advances have made 401GO automation possible, and automation is the key to keeping costs low. 

With automation, the setup process that previously took weeks and required professional advice can now be done in minutes with no help at all. Automation ensures reports are accurate and filed on time. Automation monitors plans for compliance. Automation eases burdens for employees, too, increasing participation rates and contribution amounts. Automation even offers financial education and advising to help all participants build their wealth and become financially independent.

Because these jobs no longer require much human attention, 401(k) plans are vastly more affordable than they used to be.

The only thing we don’t automate is relationships. Our world-class support team offers live help from human beings when you need it, so you are not frustrated by technological problems you can’t solve! 

6 More Ways 401GO Helps Small Businesses

Affordability is just one way online platforms like 401GO help small businesses. Read more about the benefits of automated 401(k) plans, or start a new plan today.