401(k)s allow business owners and employees to save up to $56,000 annually through tax-free salary deferrals, matching, and profit-sharing. While all 401(k)s follow IRS rules, choosing the right provider is still very important. We’ve reviewed more than a dozen 401(k) companies and compare the 10 best below.
For a low-cost, full-featured 401(k) plan that is able to grow as you do, consider ShareBuilder 401k. Their advisers and customer success managers will help you determine the right plan design, conduct employee education, and answer all your 401(k) questions. The one-time setup fee of $750 is waived through December 20th and administration costs start at just $100 per month.
Top 401(k) Providers
(Best Overall) Full-service 401(k) provider
Owners seeking an all-online provider that includes cost-competitive funds
Businesses that want a full-service alternative to Wells Fargo
Owners seeking a simple plan that handles the burden of regulatory compliance
Businesses looking for an easy-to-use investment platform for administering their 401(k)
Owners seeking the widest range of low-cost mutual fund options
Businesses that need a payroll provider with seamless 401(k) administration
Another full-service alternative to Wells Fargo and Merrill Edge
Comprehensive 401(k) plans offering a wide array of investment options
Small businesses looking for personalized service from dedicated account relationship managers
How We Evaluated the Best 401(k) Providers
When determining the best 401(k) management companies, we looked at traditional banks, HR companies, mutual fund companies, payroll providers, and third-party administrators. 401(k) providers come in all shapes and sizes, and we found a wide range of top providers that offer an array of services. Members on our list offer different services with varied billing structures.
After looking at various types of 401(k) providers, here are the criteria we used to determine the best:
- Role in the process
- Ease of integration
- Investment options
- Administrative costs
- Employer and employee customer service
Ultimately, there are a lot of 401(k) options out there. If you already have a relationship with a provider or administrator, they will be able to best guide you. If not, we recommend Wells Fargo as the best full-service 401(k) provider or ShareBuilder 401k as the best all-online option. Vanguard is also an extremely strong provider, but they don’t provide 401(k) plan administration, recordkeeping, payroll processing, or additional banking services.
Wells Fargo: Best Overall 401(k) Provider
Wells Fargo is the best 401(k) management company due to its credible reputation and diverse list of services at a competitive fee structure. Wells Fargo can help clients in 401(k) administration, trading, investment advice, and cash management—in addition to business lending and other business banking needs. If you are looking for a single firm that can fill all of your needs, including a 401(k), Wells Fargo is your best option.
What Wells Fargo Offers
Wells Fargo is one of the largest diversified financial services holding companies in the world. In addition to 401(k) administration, Wells Fargo provides a wide range of services, including retail and business banking, securities brokerage, and wealth management. The bank has about $2 trillion in assets, while the investment advisory division manages another trillion.
Wells Fargo provides a host of in-house and independent investment options for 401(k) clients, including:
- Mutual funds: Wells Fargo recommends an array of mutual funds as investment options within 401(k)s. The company offers its own mutual funds and also makes funds from other providers available to 401(k) participants.
- ETFs: 401(k) clients can also invest in Wells Fargo or third-party ETFs, which are baskets of individual securities like mutual funds that trade like stocks.
- Stocks: You can actively trade domestic and international stocks with Wells Fargo.
- Bonds: Wells Fargo also allows participants to trade individual debt issues.
- Target date funds: Wells Fargo has a line of target date funds that are designed to automatically adjust the underlying portfolio based on a targeted retirement date.
Setup & Plan Administration
With its numerous business groups, Wells Fargo can serve almost any small business need. In a 401(k) plan, Wells Fargo can help with the following:
- Plan administration: Wells Fargo serves as a third-party administrator and record keeper for 401(k) and other employer-sponsored retirement plans.
- Cash management: With its suite of banking services, Wells Fargo can help small business owners manage business resources from month to month.
- Payroll: The firm provides payroll processing for small businesses as an add-on service.
- Trading platform: Wells Fargo’s securities trading platform is available to all brokerage clients and can be used to handle trades through 401(k)s.
- Investment advice: For those who need help managing investments, advisers from Wells Fargo can provide individual guidance.
- Proprietary investment options: Wells Fargo has a host of in-house investment products, including mutual funds that are available to 401(k) participants.
Wells Fargo has a comprehensive online platform as well as retail banking branches around the country where clients can go for assistance. In addition, Wells Fargo has contracted with independent financial advisers throughout the country who, though not branded under Wells Fargo, can help clients navigate the company’s various offerings, get answers to questions, and start or administer a plan.
In addition, they also offer the following extra services:
- Online securities brokerage: Wells Fargo has its own brokerage arm where businesses and consumers can invest using their online platform.
- Investment advisory services: Investors who want one-on-one guidance can turn to Wells Fargo for financial advice pertaining to their 401(k) or other accounts.
- Insurance and annuities: Employers and employees who need life insurance and other annuities can also find them through Wells Fargo.
- Proprietary banking and investment products: Like many full-service firms, Wells Fargo has its own mutual funds, ETFs, and more, offered to customers at a low cost.
- Personal and business banking: Wells Fargo can, of course, provide consumer and banking services.
- Lending: Finally, small business owners can turn to Wells Fargo for business and personal loans, as well as margin accounts for investments separate from 401(k)s.
Wells Fargo 401(k) Costs
The costs for a Wells Fargo 401(k) vary greatly based on the size of a plan, number of participants, investment options available, as well as the specific role(s) that Wells Fargo is playing in setup and administration.
The typical Wells Fargo 401(k) costs include:
- Plan administration fee (0.25% to 2% per year): Administrative costs can be based on either employee headcount or amount of assets in the plan, depending on the provider. As the plan grows in assets or number of participants, administrative costs rise.
- Annual fund fee (0% to 1.25% per year): Fund fees are based on the amount of assets invested in the fund, paid automatically by the fund, and included in a fund’s expense ratio. The fee will rise as more assets are invested in the fund. 401(k) plans should not include “loaded” funds that are sold at a markup, as this generally violates an employer’s fiduciary duty to a plan.
- Custodian fee (0.1% to 0.5% per year): This is usually based on employee headcount and rises as the number of plan participants grows.
What Wells Fargo Is Missing
While Wells Fargo has many offerings, the biggest drawback is that they often involve overlapping divisions within the firm. This can make it complicated to solve problems that arise. Additionally, the many potential add-on business services have their own fees, so it’s important to know exactly what you need and what you’re willing to pay for it.
ShareBuilder 401k: Best All-online 401(k) Provider
ShareBuilder 401k is focused on offering low-cost 401(k) plans to self-employed individuals and small businesses that include the lowest-cost, best-in-class investment options available. Using ShareBuilder 401k, small business owners can set up a plan completely online for a flat fee and start investing immediately.
ShareBuilder 401k typically charges a setup fee up to $750, but through December 20th it is offering to set up accounts for free.
What ShareBuilder 401k Offers
ShareBuilder 401k is focused on offering low-cost 401(k) plans to small businesses of all sizes. While most of the best 401(k) management companies help small business with as few as 10 to 12 employees, ShareBuilder 401k can serve small business owners with no employees besides themselves.
ShareBuilder 401k has an investment committee that has assembled a line-up of low-cost investment options, including:
- Index ETFs: ShareBuilder 401k makes available to plan participants about a dozen low-cost index ETFs that have annual expense ratios of 0.39% or less.
- Model portfolios: Participants can use five different model portfolios that are comprised of mutual funds, ETFs, REITs, and other investments.
Setup & Plan Administration
ShareBuilder 401k offers 401(k) plans with as few as one participant, but specializes in businesses with between six and 10 employees. ShareBuilder 401k focuses on the following:
- Plan administration: ShareBuilder 401k administers 401(k) plans and handles all recordkeeping as well as IRS testing.
- Investment platform: Participants in plans administered by ShareBuilder 401k can invest in ETFs and other investment options through ShareBuilder 401k’s online platform.
ShareBuilder 401k’s platform is an excellent, streamlined service for business owners who are comfortable handling plan setup and administration online. In addition to handling plan issues online, ShareBuilder 401k has a team of professionals who can assist small business owners with plan issues as they arise.
ShareBuilder 401k Costs
ShareBuilder 401k offers plans with flat fees that vary based on the type of plan you establish and the number of participants in your plan. Plans for businesses with employees can start at $500 upfront and $95 per month.
ShareBuilder 401k costs include:
- One-time setup fee ($150 to $750): Setup fees depend on whether you’re setting up a Solo 401(k), a Traditional 401(k), or a Safe Harbor plan.
- Plan administration fee ($25 to $110 per month): Monthly administrative costs vary based on the type of plan you have, and can also fluctuate based on the number of participants in your plan.
- Annual fund fee (0.04 to 0.39% per year): Participants in plans administered by ShareBuilder 401k pay annual investment fees that vary based on the investment options they choose. These fees are deducted directly from participant accounts and range from 0.04% to 0.39% for index ETFs and 0.06% for model portfolios.
What ShareBuilder 401k Is Missing
ShareBuilder 401k is an excellent provider for small business owners who are comfortable setting up a 401(k) plan online. However, ShareBuilder 401k’s streamlined offering doesn’t allow for alternative investment options like individual stocks or bonds. The company is also focused on making low-cost options available to super-small businesses, but isn’t as good at custom options for mid-level companies.
Merrill Edge: Another Great Full-service 401(k) Provider
Merrill Edge is on online brokerage unit of Merrill Lynch, which has been wholly owned by Bank of America (BoA) since 2009. Merrill trails Wells Fargo largely because of uncertainty resulting from its recent restructurings. However, Merrill Edge is still a great full-service 401(k) provider for small business owners, especially those who need or want additional banking services.
What Merrill Edge Offers
Through Merrill Edge, small business owners can get access to all BoA services and resources, including business banking, lending, and wealth management. As a standalone unit, Merrill Edge offers clients an easy, cost-effective 401(k) option that provides ample investment options, streamlined service, and a straightforward fee structure.
Like Wells Fargo, Merrill Edge offers investors a host of investment options, including:
- Mutual funds: Like Wells Fargo and other providers, Merrill typically structures 401(k)s with an array of mutual fund investment options for participants. Merrill Edge offers mutual funds from Merrill Lynch as well as other providers.
- ETFs: As with other providers, 401(k)s through Merrill Edge with brokerage options allow for investing in ETFs that trade like stocks. You can access ETFs from Merrill Lynch as well as other providers.
- Stocks: If given a brokerage option within a 401(k), participants can actively invest in individual stocks.
- Bonds: Some investors can also buy and sell individual debt issues in their 401(k)s.
- Target date funds: Merrill Edge doesn’t have its own target date funds, but offers funds from Merrill Lynch and other providers designed to automatically adjust the portfolio balance as a targeted retirement date draws near.
Setup & Plan Administration
While Bank of America and Merrill Edge provided a number of different financial services, Merrill Edge is predominantly a discount brokerage arm and trading platform. As a 401(k) provider, Merrill seamlessly handles many services, including:
- Plan administration: Merrill can administer the plan, conduct compliance testing, and help you bring your 401(k) plan back in compliance if it fails any nondiscrimination tests.
- Recordkeeping: As part of 401(k) plan administration, Merrill can setup the recordkeeping system required for all plans.
- Trading: Merrill has its own trading platform that your employees can use to make changes in their portfolio.
- Account reporting: Merrill provides statements to 401(k) account holders and assists with required filings for your plan.
While Merrill is not a payroll provider, it does make it easy to coordinate contributions to your plan by setting up automatic contributions for employees, as well as cash sweeps for employer matching and any profit-sharing.
While Merrill Edge is predominantly online, its parent companies have offices around the world. Merrill Lynch offices and Bank of America (BoA) branches are in most communities across the country. You can use a dedicated representatives from one of these offices to resolve any issues and provide individual guidance, in addition to numerous other financial services.
Merrill Edge 401(k) Costs
While not the cheapest 401(k) company, Merrill Edge is relatively cost effective. Even more significantly, they are easily one of the most straightforward providers in terms of cost. All the costs of a 401(k) through Merrill Edge are available through their website and provided in an in-depth proposal for prospective clients.
The typical costs for a Merrill Edge 401(k) include:
- Setup fees ($390): Merrill charges a flat setup fee that is deducted from the business account.
- Monthly administration fee ($90): Administration fees are also paid by the employer and are also flat fees.
- Investment fiduciary fee (0.07% annually): Fiduciary fees are paid by employees and based on the amount of assets in their account. As employees invest more in their account, their fiduciary fee will increase.
- Participant service fees (0.20% annually): Participant fees are also paid by employees and based on the amount of assets in their account. The more they invest, the higher their service fee.
- Account servicing fee (0.25% annually): Account fees are also paid annually by employees and increase as the size of their account rises.
- Recordkeeping fee ($4 monthly per participant): Recordkeeping fees are a flat, monthly amount paid by each plan participant. The total recordkeeping fee charged will rise as the number of participants increases, but the fee per employee will not change.
- Mutual fund expense ratio (0.03% to 2% annually): Whether you use Merrill funds or outsize independent options in your 401(k), mutual funds will include annual expense ratios that are paid automatically by each employee. Beware of funds that charge more than 1.5% annually. As you invest more in a fund, the amount charged by the fund to cover its expenses will increase.
What Merrill Edge Is Missing
As a business unit, Merrill Edge is focused predominantly on discount brokerage services. For almost any add-on service or for individual customer assistance, you’d need to work with additional units within Bank of America. There are many products and services available, but it can be difficult to piece them all together properly across multiple divisions. Additionally, several lines of business are commission-driven, so be careful not to buy expensive products or services that you don’t need.
Guideline: Best 401(k) Provider for Regulatory Compliance Assistance
Guideline is one of the best 401(k) investment companies because it promises transparent pricing and simplicity, and this 401(k) provider delivers. Companies can choose from two different plans, both of which offer a full array of services—including assistance with regulatory compliance—for a flat monthly fee plus a fixed per-employee cost.
What Guideline Offers
Guideline is a newer financial service provider compared with legacy 401(k) providers such as Wells Fargo, but has already made its mark. Founded in 2015 to create a new way to save for retirement, Guideline already administers more than 8,750 401(k) plans and has over $1 billion in assets under management.
Guideline offers employees two different options for investing, so every 401(k) plan participant can find investments that suit their needs.
- Index funds: Guideline offers more than 40 index funds to choose from, including funds from low-cost providers such as Vanguard. Funds in Guideline’s portfolio of investments charge a blended average of just 0.06%.
- Managed portfolios: Guideline works with employees to assess risk tolerance and builds a recommended portfolio of funds well-suited to their retirement goals. There are no fees charged by Guideline for managed portfolios.
Setup & Plan Administration
Guideline offers a choice of two plans: an entry-level Startup Plan and a costlier but more robust Prime Plan. Both offer a full array of features for businesses, including:
- Assistance with regulatory compliance: Guideline handles compliance testing and serves as an ERISA fiduciary for eligible plans. The 401(k) provider also takes care of required annual reporting, including Form 5500 filing
- Robust account management features: In addition to an all-in-one dashboard that makes plan administration simple, Guideline also integrates with popular payroll providers, takes care of employee onboarding, facilitates profit-sharing and matching contributions, and maintains a detailed employee roster.
Guideline has been recognized for its first-of-a-kind software that streamlines 401(k) setup and management for businesses with as few as two employees and as many as hundreds of plan participants.
A free 30-minute 401(k) consultation helps your company get your plan up and running quickly, while unlimited phone, email, and chat support ensures prompt answers to questions and expeditious problem solving. Prime plan participants also receive priority support with a dedicated account manager assigned to them.
Guideline 401(k) Costs
Guideline is one of the most affordable 401(k) providers, both for employers and employees. Pricing is transparent and employers have a choice of two different plans depending on their needs.
The costs of a Guideline 401(k) include:
- Startup Plan ($39 per month plus $8 per employee): This pricing includes portfolio design, unlimited customer support, employee loans and hardship withdrawals, vesting, matching, profit-sharing contributions, assistance with compliance, employee onboarding, and fulfillment of reporting requirements.
- Prime Plan ($99 per month plus $8 per employee): The Prime Plan includes all the features of the Startup Plan as well as advanced, customizable financial reports, a dedicated account manager, priority support, and support for any payroll provider.
Neither plan charges investment management fees or custodial fees, and both plans offer mutual funds with low expense ratios. Both plans do charge a $250 termination fee, as well as fees for specialized services employees may require—including a $100 fee for employees who apply for loans and a $75 per year annual loan maintenance fee.
What Guideline Is Missing
While Guideline offers more than 40 affordable funds to choose from, it does not offer employees the chance to invest in individual stocks or bonds. Guideline also focuses on keeping fees low for plan participants, but offsets some of this cost with the $8 per employee fee charged to the company. Some companies may find this makes their plan more expensive than those offered by other providers that pass more costs on to employees.
Human Interest: Easiest to Use Low-cost 401(k) Provider
Human Interest is a relatively new Silicon Valley startup that has proven to be a real disrupter in the 401(k) space. The business was founded on a belief that many 401(k) companies charge excessive or hidden fees. Human Interest is an investment platform that can administer your 401(k) plan, and is great for small business owners willing to use an “online” provider for ease of use in order to save time and money.
What Human Interest Offers
Compared to other 401(k) companies, Human Interest is extremely low cost. This is partially due to their sales model, which is focused on marketing directly to small business owners rather than through financial advisers. While they don’t offer payroll services in-house, they work well with most systems and provide a core group of services very efficiently.
Unlike some other providers, Human Interest provides more limited investment options. Still, the funds they offer are typically the most popular types of investment vehicles for retirement accounts.
Human Interest investment options include:
- Mutual funds: Human Interest provides 401(k) participants with an array of well-diversified mutual funds to choose from, offered by reputable companies.
- Target date funds: 401(k) participants can also invest in funds that are structured specifically for shifting debt-to-equity ratios as investors move closer to retirement. While potentially beneficial, target date funds can involve additional fees. Vanguard offers many of these funds and you can access them through Human Interest.
Setup & Plan Administration
Human Interest has a core group of services that they provide very efficiently. For other items like payroll services, they work very well with any outside providers that a small business relies on. The primary 401(k) services offered by Human Interest include:
- Plan design and administration: Human Interest will help you design a plan that meets your specific needs, and implement and administer the plan.
- Recordkeeping: The company will handle recordkeeping for your 401(k), included with administration services.
- Trade processing: 401(k) clients are able to trade a limited number of securities through their trading platform.
- Guidance on investment options: Human Interest will help individual employees with selecting investment options as necessary.
- Financial literacy courses and employee resources: In addition to helping employees pick 401(k) investments, Human Interest provides resources for 401(k) participants to learn more about saving and investing.
As a younger company, Human Interest is almost entirely online. There are no offices around the country for clients to get guidance, nor is there a menu of additional services that many other providers offer.
However, each 401(k) client gets a dedicated account manager, and the company works with other types of providers to make administration seamless for business owners and employees. They even provide support for 401(k) plan participants who want to borrow against their retirement assets.
Human Interest 401(k) Costs
Of all the providers surveyed, perhaps none was more upfront with the costs of their services. Human Interest provides a detailed list of their fees directly on their website, and is extremely cost-efficient in their offering.
The costs of a Human Interest 401(k) include:
- Administration and recordkeeping ($120 per month plus $4 per employee): These fees will rise as you add employees, but the fee per participant does not change.
- Investment advisory fee (0.50% per year paid by employees): As the amount each participant invests through the plan increases, their investment advisory fee will rise.
- Investment fund fees (0.08% per year on average): Investment options available through Human Interest charge an average of 0.08% per year on funds invested in each fund.
What Human Interest Is Missing
While Human Interest is a great, low-cost alternative 401(k) provider, it does have its drawbacks. For one, it has no network of offices where clients can sit down with advisers for guidance. There are no banking or other brokerage services for small business owners.
Also, the company offers little flexibility with investment options, instead keeping employees limited to more general options with broad suitability. This gives investors little ability to focus investments in particular sectors or industries based on their own outlook or risk tolerance.
Vanguard: Best 401(k) Provider for Mutual Funds
Vanguard is the largest mutual fund company in the world, managing more than $4.5 trillion. The company offers professionally managed mutual funds and ETFs that can potentially be used within a 401(k) plan, depending on the design of the plan. Vanguard is the ideal provider of investment options for any 401(k). Typically, you can access Vanguard funds through many providers, and should be used in conjunction with a third-party administrator.
What Vanguard Offers
In the 401(k) space, Vanguard’s role is confined to pure money manager. They don’t do plan administration, payroll, or banking, but they are very highly regarded as money managers and a great source of investment options for your 401(k) plan. Vanguard’s funds have many different focuses (e.g., domestic versus international, stocks versus bonds, aggressive versus conservative), and they offer investors a good deal of diversification at an exceedingly low cost.
Vanguard’s primary role in the 401(k) industry is providing well-managed investment options, including:
- Mutual funds: Vanguard offers more than 100 mutual funds that are well-managed and among the most inexpensive in the industry. They are available to 401(k) participants through most plan administrators.
- ETFs: For those employers who structure a 401(k) to include a brokerage option, Vanguard also offers a line of ETFs that are also well-diversified and low cost.
- Target date funds: Vanguard offers a wide array of funds that are designed to automatically adjust the underlying portfolio over time as a targeted retirement date draws closer. Unlike other providers that tend to layer fees for target date funds, Vanguard’s target funds are among the most cost-effective in the mutual fund industry.
Setup & Plan Administration
Vanguard offers relatively easy integration with banks and payroll service providers when used through an administrator platform. However, like most mutual fund companies, they still have substantial room for improvement when it comes to technology and seamless integration.
For retail investors, Vanguard’s customer service is pretty good. However, 401(k) plans typically hold Vanguard funds through an intermediary, like a plan administrator. This means that Vanguard doesn’t coordinate customer service directly. Instead, customer service is typically handled by a 401(k) administrator.
Vanguard 401(k) Costs
Vanguard’s expenses in the 401(k) space are confined solely to fund charges. Most 401(k)s typically don’t use loaded funds, so they only pay fund expense ratios that average 0.12%. These fees increase as the amount invested rises and are automatically deducted from participant accounts. They can often be used to offset other expenses within a 401(k) plan, depending on the other providers you use.
What Vanguard Is Missing
The biggest drawback with Vanguard is their direct customer service in the 401(k) space. Because small businesses work through an administrator or adviser to use Vanguard’s funds in a 401(k), investor access to fund managers is restricted, as is individual customer service. Vanguard also does not conduct plan administration or recordkeeping in-house, nor does it provide any add-on services for small businesses.
Paychex: Best Payroll Provider for Easy 401(k) Administration
Paychex is an excellent, affordable provider of payroll and HR services. They also provide outsourced benefits solutions, business loans, and other services for small- and mid-size businesses. Paychex is a great provider for small business owners who want to outsource payroll processing to a company that can integrate well with 401(k) administrators and other providers.
What Paychex Offers
Paychex focuses primarily on payroll, though in the 401(k) arena they also provide critical recordkeeping services. Most importantly, however, Paychex offers seamless integration with 401(k) third-party administrators (TPAs), making the process of plan administration much easier for small business owners.
As a payroll provider, Paychex does not offer any investment options. Instead, its client firms are able to use any investment options available through the plan administrator they choose.
Setup & Plan Administration
Paychex is being highlighted here for the extreme ease in which they can coordinate with 401(k) plan administrators. This gives small business owners a great deal of flexibility to choose an administrator, trading platform, and investment options that are right for them. Paychex’s role in the process is confined, but effective and cost-efficient. For example, they’ll facilitate pre- or post-tax employee contributions as well as any employer match.
While Paychex is focused almost exclusively on payroll and HR solutions, there are more than 100 offices in parts of the country that small business owners can contact for assistance. The company does a great job of making it easy for business owners to work with 401(k) plan administrators to implement a plan and make contributions.
Paychex 401(k) Costs
Because Paychex does not provide plan administration or investment options, its costs are confined to payroll services, should you decide to use them. Their billing structure is based on the number of employees and pay periods per year, and increases with the number of employees and number of annual periods. They have additional charges for processing employee W-2s and other tax forms, and you need to contact them directly for a free quote.
What Paychex Is Missing
Though a reliable payroll provider, Paychex plays a very narrow role as a 401(k) company. It does conduct recordkeeping, but does not handle plan administration or trading—its role is confined to payroll processing. Still, the company offers flexibility with providers of other services and investment options that are used within a 401(k) plan.
Fidelity: Another Full-service 401(k) Provider to Consider
Fidelity is a diversified financial services company offering mutual funds, securities brokerage, and business and personal banking, including credit cards and business loans. Fidelity won’t beat some other providers listed here, but may be competitive for some 401(k)s in some cases and is a good option, especially if you already have a relationship with them.
What Fidelity Offers
Like Wells Fargo and Merrill Edge, with Fidelity, small business owners can get access to 401(k) plan administration and recordkeeping services, a full trading platform, and investment advisory services, plus personal and business banking. Many of these services come from different business units, but can all be provided by Fidelity as a full-service firm.
Fidelity makes an array of in-house and independent investment options available to 401(k) clients, including:
- Mutual funds: In addition to its own line of mutual funds, Fidelity also offers 401(k) participants access to funds from other providers through its trading platform.
- ETFs: If a 401(k) is established with a brokerage option, participants can trade in ETFs, both from Fidelity and other providers.
- Stocks: Employees can actively buy individual shares in companies if their plan includes a brokerage option.
- Bonds: Plan participants in certain plans can also trade in individual debt issues from companies and countries.
- Target date funds: Fidelity offers a wide array of target date funds through its Freedom Funds line, with targeted retirement dates in five-year increments ranging from 2005 to 2065. The funds automatically adjust as the targeted retirement date gets closer.
Setup & Plan Administration
As a full-service financial firm, Fidelity offers a host of different financial services. In addition to its line of mutual funds, trading platform, and banking services, Fidelity also offers a number of services specific to 401(k)s, including:
- Plan administration: Fidelity helps in plan design and implementation, compliance testing, and Form 5500 preparation and filing.
- Recordkeeping: Fidelity can serve as a record-keeper required for 401(k) plans.
- Trading: 401(k) plan participants can select investment options and trade securities through Fidelity’s trading platform.
- Account reporting: Fidelity takes care not only of plan reporting for the IRS, but also reporting plan and account changes to plan participants.
As a privately owned company, Fidelity emphasizes customer service. Naturally, as a large, national brand, they sometimes come up short. Still, they have offices in a number of communities around the country, where clients can go to get individual assistance or work with a dedicated adviser for one-on-one guidance.
Specific additional services that Fidelity offers include:
- Personal and business banking: In addition to checking and savings accounts, Fidelity offers CDs and credit cards.
- Securities brokerage: Perhaps Fidelity’s biggest service is helping clients to trade in securities.
- Investment advisory services: For clients who want help selecting an investment strategy or specific services, Fidelity can provide in-depth investment advice.
- Payroll processing: Though typically better for larger companies, Fidelity even offers payroll services to businesses that can integrate fully with health and retirement benefits.
Fidelity 401(k) Costs
The typical costs for a basic Fidelity 401(k) include:
- Plan administration: Fidelity doesn’t make fee information available publicly, but bases administration fees on the number of plan participants and plan assets. These fees tend to rise as the number of plan assets and participants increase, but should never exceed 1.5% to 2% of plan assets.
- Recordkeeping: Recordkeeping is often included with plan administration, but Fidelity may also provide standalone recordkeeping services. The fees for this service are allegedly based on number of participants and plan assets, but are typically between 0.4% and 1%. Recordkeeping costs also tend to rise with the number of plan assets and participants.
- Mutual fund expense ratios: Most 401(k)s provide participants with a selection of mutual funds that don’t charge loads but do include expense ratios that cover trading and management costs. Expense ratios should range between 0.3% and 1.5%.
What Fidelity Is Missing
The biggest thing missing with Fidelity is more detailed information on costs. More than many other providers, fee information is a closely held secret with Fidelity. Before contracting with Fidelity as a 401(k) investment company, make sure to carefully review proposed costs and fine print.
Charles Schwab: Best 401(k) Provider for Custom Plan Options
Charles Schwab offers both a full-service 401(k) plan customized to your company and the option to add investment advisory services to an existing 401(k). Charles Schwab has both a broker-dealer and banking subsidiary, so it can provide a full range of financial services. It also offers its own proprietary mutual funds and ETFs to plan participants, along with other investment options.
What Charles Schwab Offers
Charles Schwab is one of the biggest names in the financial services industry, with more than 1.7 million employees participating in its corporate retirement plans. Schwab has total client assets of nearly $3.75 trillion, more than any other publicly traded firm in the U.S. Plus, Schwab ranks highest in Retirement Plan Participation Satisfaction and has been named the Most Trusted Provider by the National Association of Retirement Plan Participants.
Charles Schwab provides a wide array of investment options for retirement plan customers, including:
- Mutual funds: Schwab offers thousands of mutual funds with no loads and no transaction fees. This includes more than 50 Schwab funds that target specific investment objectives.
- ETFs: With Schwab ETF OneSource, investors can find ETFs they can purchase in their 401(k) accounts without paying commission fees.
- Stocks: Companies can include a brokerage option so plan participants can purchase individual shares of U.S. and international stocks.
- Fixed income investments: Schwab 401(k) plans can also provide investors with the opportunity to invest in bonds or annuities if they’d prefer conservative investments or are nearing retirement age.
Charles Schwab also provides the option for managed accounts, which enable plan participants to get personalized advice on asset allocation based on their contribution rate, age, account balance, salary, employer contribution formulas, and other relevant factors.
Setup & Plan Administration
When establishing a Schwab 401(k) plan for your business, you will get a customizable plan that is designed to meet the needs of your organization and employees. The primary 401(k) services Schwab offers include:
- Plan design and administration: The process begins with an assessment of your company’s needs and establishing goals. A dedicated team will help you to develop and implement your plan and will offer an annual progress review.
- Consultation in ERISA compliance: Assistance with fulfilling retirement plan regulations helps to ensure your company doesn’t violate guidelines established by the Employee Retirement Income Securities Act (ERISA) of 1974. Schwab also monitors legislative changes and regulatory actions to proactively determine how modifications to the law could affect your plan.
- Plan analytics: Schwab retirement plans come with plan analytics to help companies analyze the characteristics of plan participants and identify trends. Data provided includes details on participant contributions, the number of participants contributing too little to earn the full employer match, and retirement savings progress for different groups of plan participants.
Schwab offers companies a choice of communication methods, including the opportunity to obtain support in-person, via online chat, or via phone. You can also get support online or via your mobile app, or can take advantage of Schwab’s webcasts, apps, and videos.
Charles Schwab 401(k) Costs
Charles Schwab does not publicly disclosing pricing for 401(k) setup or administration. The financial services provider indicates that fees vary based on the needs of your business and the solutions that Schwab develops for you.
The costs of a Charles Schwab 401(k) include:
- Plan administration: You’ll pay for both plan design and ongoing plan administration services, including assistance with regulatory compliance.
- Managed investment fees: Plan participants who choose to take advantage of Schwab’s managed investment opportunities will generally pay additional fees for access to investment assistance. Companies with independent 401(k) plan providers may also choose to partner with Schwab to provide investment advice, performance monitoring, participant education, and consultative services.
- Fund fees: ETFs and mutual funds typically charge small fees for trading and management costs. Schwab makes a number of affordable ETFs and mutual funds available to investors, including proprietary funds that have asset-weighted expense ratios as low as 0.04%.
What Charles Schwab Is Missing
Unlike many of the best 401(k) providers, Charles Schwab does not make pricing for setup or 401(k) administration publicly available. Businesses hoping to comparison shop prior to contacting plan providers will likely find this a major drawback because securing pricing from Schwab will require a phone consultation.
Employee Fiduciary: Best 401(k) Provider for Personalized Service
Employee Fiduciary was first founded in 2004 to serve as a low-cost 401(k) plan provider catering to small businesses. The goal of Employee Fiduciary was to democratize retirement investment and enable small businesses to gain the same access to 401(k) plans as some of the largest companies in the country. Employee Fiduciary administers more than 3,000 small business 401(k) plans that collectively hold close to $3 billion in assets.
What Employee Fiduciary Offers
Every company that signs up for a 401(k) plan with Employee Fiduciary will go through a plan design consultation to create a plan that meets the company’s goals and budget. Companies with existing 401(k) plans will also benefit from Employee Fiduciary’s plan conversion services as they move their plan over to this new provider.
Employee Fiduciary is one of the 401(k) companies that focuses on low-cost investments. But the firm also provides personalized service after setup, with a dedicated relationship manager assigned to each client.
Employee Fiduciary 401(k) investment options include:
- NSCC-tradable mutual funds: Choose from 377 fund families providing access to 30,000 share classes.
- Vanguard funds, index funds, and exchange-traded funds: The option to include self-directed brokerage accounts from TD Ameritrade also adds an additional level of investment flexibility to plans managed by Employee Fiduciary.
Setup & Plan Administration
Employee Fiduciary begins providing personalized service from the first day. You’ll receive plan design consultation, training, and support. The primary 401(k) services offered by Employee Fiduciary include:
- Plan design and administration: Employee Fiduciary offers plan design consultation to help your company identify the plan features most beneficial to employees. The firm also creates startup documents, including enrollment materials for plan participants and a summary plan description.
- Training and support: Employee Fiduciary offers training on using the plan website, uploading payroll data, and establishing website access both for the company and plan participants.
- Regulatory compliance assistance: This includes preparing an annual Form 5500, updating plan documents to comply with applicable laws, completing required annual non-discrimination testing, preparing participant notices, and calculating the allocation of year-end contributions.
- Bookkeeping and recordkeeping services: You’ll receive updated share prices and account balances for individual accounts, quarterly benefits statements, fee disclosures to participants, and processing of contributions, distributions, plan trades, and funds transfers.
With Employee Fiduciary, every business with a 401(k) plan is assigned a dedicated relationship manager. Many other 401(k) investment companies offer this only to companies with premium accounts. Service is available via phone through the company’s 800 number. Employee Fiduciary also offers a dedicated 401(k) help center that includes ample free educational resources, including a checklist for shopping for a 401(k) provider.
Employee Fiduciary 401(k) Costs
Transparent pricing is one of the best features of Employee Fiduciary. The 401(k) administrator offers a detailed list of its startup, annual, and ongoing fees.
The costs of an Employee Fiduciary 401(k) include:
- Initial fees: You’ll pay a $500 startup fee for new plans or a $1,000 conversion fee to move an existing plan to Employee Fiduciary.
- Base fee: $1,500 per year.
- Custody fee: This equals 0.08% of plan assets.
You can use Employee Fiduciary’s online tool to answer a few simple questions in order to calculate the total cost of starting and administering a 401(k) plan with this plan administrator.
What Employee Fiduciary Is Missing
Plan participants are limited in their investment options with no opportunity to invest in stocks or bonds. Unlike some larger financial firms, Employee Fiduciary also doesn’t offer other services beyond 401(k) plan administration. And its mobile apps and other technology are not as robust as larger providers.
List of 401(k) Providers
|(Best Overall) Best full-service 401(k) provider for small business owners|
|Best all-online 401(k) provider with low-cost investment options|
|Great for business owners who have additional financial service or banking needs (not subsidiary of BoA)|
Businesses looking for a simple, affordable plan that handles much of the burden of regulatory compliance
|Cost-effective option for small business owners who are comfortable using technology for administration and trading|
Best provider of professionally managed, low-cost 401(k) investment options
Best payroll provider with seamless 401(k) administration
Another full-service 401(k) provider
|Employers who want no annual fees and access to a full array of brokerage and banking services|
Best for employees looking for an alternative provider with low fees for 401(k) setup and administration
Best white-glove service option; access to business and investment banking, managed portfolios, and other proprietary products
|Reputable mutual fund company that offers more sector funds than most money managers and greater opportunities to diversify|
|A large accounting firm with great no-frills 401(k) administration and auditing|
Great alternative provider of full-service plan administration, ideal for employers using 401(k) assets to finance their business
|A well-established payroll provider with seamless 401(k) administration|
|A large mutual fund company that offers 401(k) investment options and two different plan solutions|
|An investment management firm that provides administration and advisory services|
Alternative Options to a 401(k)
If you aren’t sure a 401(k) is right for you, you may want to consider several other types of accounts, including SEP or SIMPLE IRAs. Each has their own benefits, but as IRAs, they are far cheaper and easier to implement and maintain than 401(k) plans.
SEP IRAs can be ideal alternatives if you’re self-employed or own a small business with less than three to five employees. If you make more than $75,000 per year, a SEP can be especially advantageous because you can contribute up to 25% of income or $56,000 without the expense of a 401(k).
The key difference with SEP IRAs is that employers are required to fund all contributions for themselves as well as their employees. There are no employee salary deferrals or matching contributions. For businesses with more than three to five employees, this can often be more expensive than a 401(k).
A SIMPLE IRA is literally simpler than a 401(k). It has even been called the “poor man’s 401(k)” because it offers many of the same benefits for small businesses with a few employees, without the expense of administering a 401(k).
Like a 401(k), SIMPLE IRA contributions are comprised of employee deferrals and matching contributions. However, the contribution limits are lower for a SIMPLE IRA, and employer matching contributions have to follow strict guidelines.
If you’ve decided to structure a 401(k) for your business, be sure to consider certain factors when choosing providers. Items other than cost are important, including ease of integration, customer service, and additional services offered. 401(k) companies come in all shapes and sizes, and provide very different services to small businesses.