What Are My Options For Inexpensive 401(k) Plans?


I want to offer employees a basic 401k, but most of the plans I've seen are tailored toward larger companies.

What are some good options for inexpensive small business 401k plans with low setup and administration costs?

This would be for the 5-20 employee range (5 now, expecting as many as 20 within 2 years).

Benefits 401k

asked Nov 20 '10 at 03:58
Jason Champion
138 points

9 Answers


If you don't know one already, I suggest you start looking for a fee-only financial advisor/consultant. They're all over, so make sure to ask for referrals from people you know. Your bank likely has one, and there are plenty of franchises of Ameriprise, Edward Jones, etc., around the country.

Not only will an FC help you with your personal/family retirement, he will be able to help you set-up a retirement plan for your company. He'll also be someone to go to when you have any kind of financial questions (lease vs. buy a car, etc), and will be right up there with your CPA and lawyer as far as professional advisors. And just like those professionals, they will save you much more than they cost.

A FC will very likely advise you to go with a SIMPLE IRA. For employees, it's basically the same thing. For the employer, it requires much less work ($) to administer. The main disadvantage is smaller max contributions ($11K/yr), which is obviously a problem for highly-compensated employees and employee-owners... which you probably don't have being so small. When it becomes worth the administrative costs, you can always upgrade the company plan to a 401k.

answered Nov 21 '10 at 14:29
Alex Papadimoulis
5,901 points


In my previous companies we had 401Ks. I have set up a few and many of the companies are a major PITA. Sales people will schmooze you to the n-th degree, but once you sign up - you are on your own. Plus, they way they sneak in fees is ridiculous.
When I am going to be creating one for my current company, the only one I will I will consider is Vanguard.

answered Nov 20 '10 at 08:02
Apollo Sinkevicius
3,323 points
  • Last I checked, with Vanguard you must ALREADY have $1,000,000 in 401(k) assets (from all your employees) to open a new 401(k). That means it is usually impossible for a new company with a new 401(k) plan to use one. However, the provider we use (The Online 401(k) -- see my answer) happily allows you to include Vanguard funds in the investment options you provide your employees, so those are the ONLY fund choices we allow. – Joel Spolsky 12 years ago
  • Don't know when you checked it, but it is not the case. You sure you were looking at their small business options? – Apollo Sinkevicius 12 years ago


We have been using The Online 401(k) for Fog Creek for many years and we've been very happy with their service and the quality of their online portal.

answered Nov 20 '10 at 13:11
Joel Spolsky
13,482 points


Consider Vanguard They have a small business department. They will refer you to 401k management companies (taht run through their small business site) that have the lowest fees I have seen. My 401k is $140/year no matter how much money I have in it. I have a 1 person S-Corp. You can scale up with more people. There can be some other fees, but they are a small fraction of what I have to pay elsewhere.

Vanguard also has some of the lowest cost funds I have found anywhere. My 401k fees and my fund fees are lower than what I got through any employeer.

answered Feb 15 '11 at 05:50
164 points


I haven't used it, but ING Direct's offering seems pretty simple

answered Aug 3 '11 at 01:13
Steve French
621 points


One other possibility (if it is legal/possible) is just to match some IRA contribution. Allows people to have control of their own money and avoids your overhead. Again, not sure if this is legal but might be simpler.

answered Nov 20 '10 at 12:31
Tim J
8,346 points


For those of you who are self-employed consider participating in a Solo 401k which allows for Roth contributions and tax deductible contributions. Here are some more highlights of Solo 401k:

You can borrow against it (take a loan) up to 50% not to exceed $50K.
For 2011, you can contribute up to $49K and an extra $5K if you will turn 50 this year.
You can invest in stocks, mutual funds, and alternative investments such as real estate, notes, gold and private companies. Low administration costs--typically between $200 to $300 per year.

answered Oct 26 '11 at 11:18
Jeff Boyle Solo 401k
1 point
  • Any links to the offers? – Karlson 10 years ago


SIMPLE IRAs are specifically employer-sponsored retirement plans. It allows participants to save up to roughly $25,000 pre-tax in deferrals and matching. Date wise utilize a SIMPLE IRA, employers must implement their plan before October 1 of the year it becomes effective.

answered Mar 20 '18 at 15:52
Allan G
1 point


One of the best ways to create an inexpensive retirement plan is to utilize either index funds or ETFs. Since investment expense is typically the largest retirement plan cost, its important to use an open architecture platform that allows these types of funds.

answered Aug 2 '11 at 01:22
Burke Johnson
1 point
  • Are you proposing to run one yourself? Otherwise this answer makes very little sense. – Karlson 10 years ago

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