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The Best 401(k) Plans of April 2024
Merrill Edge 401(k) Plan
Initial Setup Fee
$390
Administrative Costs
$90 per month
Employee Fees
0.52% of AUM, plus $4 per month
$390
$90 per month
0.52% of AUM, plus $4 per month
Why We Picked It
Merrill Edge offers 401(k) plans with relatively low, straightforward fees. Their plans provide a menu of portfolio options managed by Morningstar Investment Management. Since Merrill is part of Bank of America, you can meet in-person with Merrill Edge advisors at many Bank of America branches.
Employee Fiduciary 401(k) Plan
Initial Setup Fee
$500 for a new plan, $1,000 to convert an existing plan
Administrative Costs
$1,500 per year
Employee Fees
0.08% of AUM (up to 30 employees), employer may opt to cover it
$500 for a new plan, $1,000 to convert an existing plan
$1,500 per year
0.08% of AUM (up to 30 employees), employer may opt to cover it
Why We Picked It
When you sign up for a small business 401(k) with Employee Fiduciary, one of their experts will chat with you to discuss your goals and customize a plan design to meet your specific needs and budget. They can run a free comparison if you already have a 401(k) plan to see if you’d save money.
Employee Fiduciary offers this service while still keeping costs competitive with the other top options. Your employees will have access to a myriad of investment options, including Vanguard ETFs.
Vanguard 401(k) Plan
Initial Setup Fee
Variable
Administrative Costs
Variable
Employee Fees
Variable
Variable
Variable
Variable
Why We Picked It
With a Vanguard 401(k) plan, you and your employees get access to an extensive line-up of the firm’s low-priced funds, as well as an additional 12,000 third-party funds. Vanguard does not publicly list how much they charge for their small business 401(k) plans—you’ll need to contact them for a quote.
Note that fees for a solo 401(k), SEP IRA or SIMPLE IRA plan are listed. For these options, there are no set-up fees, although they may charge administrative and employee fees. Solo 401(k)s and SEP IRAs for more than one person face a $20 charge for a Vanguard mutual fund in each account, though those fees will get waived for all participants if at least one has at least $50,000 in qualifying Vanguard assets. SIMPLE IRAs have a $25 fee, though those fees are waived on the same condition. SEP IRAs holders can also avoid fees, though the qualifications to do so are a bit more involved.
Fidelity Investments 401(k) Plan
Initial Setup Fee
$500
Administrative Costs
$300 per quarter
Employee Fees
$25 per quarter, plus a quarterly charge of 0.125% of AUM
$500
$300 per quarter
$25 per quarter, plus a quarterly charge of 0.125% of AUM
Why We Picked It
Fidelity Investments is one of the largest investment providers in the U.S., with more than 40 million clients and work with over 23,000 businesses. Like Vanguard, Fidelity is known for providing low-cost mutual funds and ETFs, which are available for their 401(k) plans. In addition, they keep fees low both for employers and employees.
ADP 401(k) Plan
Initial Setup Fee
Variable
Administrative Costs
$160 on standard plans
Employee Fees
0.10% of covered assets, subject to a minimum fee of $20.83 per month, plus a $4 monthly participant fee
Variable
$160 on standard plans
0.10% of covered assets, subject to a minimum fee of $20.83 per month, plus a $4 monthly participant fee
Why We Picked It
ADP could be a good choice if you want one company to handle all employee benefits and outsourced HR. ADP could make even more sense if you’re already working with them for payroll services as they can integrate your 401(k) with your other accounts.
ADP offers a handy calculator on their website to estimate your baseline 401(k) costs. For instance, a company with 10 employees can expect to pay about $220 per month.
Betterment for Business
Initial Setup Cost
$500
Administrative Costs
Minimum of $500 per year, plus a monthly $5 fee per employee
Employee Fees
0.25% of AUM, payable by either the employer or employees
$500
Minimum of $500 per year, plus a monthly $5 fee per employee
0.25% of AUM, payable by either the employer or employees
Why We Picked It
Betterment is one of the leading robo–advisors, and the company also manages 401(k) plans. The firm offers an easy-to-use, intuitive platform for employees that also lets the link in other retirement accounts, like individual retirement accounts (IRAs). Betterment 401(k) plans offer an array of low-cost ETFs, in addition to more specialized portfolios focused on environmental, social and governance (ESG) themes.
Methodology
For this review, Forbes Advisor began with an extensive list of the most popular 401(k) companies on the market today. We then rated these companies based on factors like setup costs, administrative fees, employee costs, funds available and services provided on top of 401(k) administration.
From there, we searched through the top contenders to see who really stood out in performance for certain areas. By looking deeper into the individual specialties of these 401(k) companies, we were able to identify the best contenders for your business.
*Note: Set-up fees, administration costs and other fees typically depend on what type of plan you select and the size of your company. For the examples above, we’ve illustrated the costs for a Safe Harbor plan. Depending on the needs of your company, costs could be different.
How to Choose the Best 401(k) Provider
The right 401(k) provider for your business depends on a few factors.
First, you should decide whether you want one company to handle both the investments and the administrative work, or if you’d like to divide it between two. Dividing between two means managing multiple accounts but gives you the flexibility to find the best fit for each part of running your 401(k).
In terms of reviewing companies, cost is an important factor. You should weigh both the costs for you as the employer as well as what your employees would pay for using the plan. If employee costs are too high, they might not enroll at all.
You should also ensure the 401(k) plan provider offers the investments your employees want, especially if you know they want specific mutual funds or a certain other type of investment.
Consider whether the provider has the 401(k) features you want, like whether they offer a Roth 401(k) vs a traditional 401(k) or 401(k) loans. Lastly, consider how they manage customer service, such as whether they offer in-person or online only.
You might also want a provider that offers robust employee education, so your workers understand how their investment decisions will affect their ability to fully fund their retirement.
What Is a 401(k) Plan?
A 401(k) is an employer-sponsored retirement plan that allows employees to contribute a certain percentage of their pay into a tax-advantaged account, and then determine how they would like to invest.
These types of plans are the most common retirement benefits offered to employees, according to a recent report by the Transamerica Center for Retirement Studies. More than half of employers offer a 401(k) or a similar type of defined contribution plan, per Transamerica. Nearly 90% of companies with more than 100 employees have one, compared to 46% of small businesses.
There’s a good reason why: employees like them. Roughly 80% of workers participate in a 401(k)-type plan when offered, per Transamerica, saving 12% of their pay.
Why do employers offer them? The top three reasons include:
- Help employees save and prepare for retirement (57%)
- Increase job satisfaction among employees (55%)
- Inspire loyalty among employees (50%)
There are two main types: Traditional 401(k)s and Roth 401(k)s.
In a traditional 401(k), contributions are made before income taxes are applied, thereby lowering your current tax bill to Uncle Sam. Your account then grows tax-free over time, and faces income taxes when you withdraw from your account.
A Roth 401(k) works in reverse. You pay the taxes up front, and then never have to cut a check to Washington again. This option makes sense for those in a lower tax bracket then they imagine they’ll be in when they start taking money out of their retirement account, typically decades in the future.
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Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circ*mstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results.
Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.
