Human Interest - The 401(k) provider for small and medium-sized businesses

Ten features that SMBs should look for in a 401(k)

By The Human Interest Team -

In today’s competitive market, it’s important to offer benefits that can help you attract and retain great employees — and that includes a 401(k). In fact, 88% of employees say a 401(k) is a must-have benefit.

401(k) plans can vary drastically and the right plan can have a big impact. The stakes are high: 401(k) features can affect an employer’s costs as well as employees’ financial futures.

How does your company’s 401(k) measure up?

Let’s review 10 important features to help you figure out what to look for in a 401(k) plan.

1. Automatic enrollment

A 401(k) plan that uses automatic enrollment (or even escalation of contributions), can help employees save more. It can also boost both participation and contribution rates.

2. Payroll integration

A modern 401(k) doesn’t only save the plan administrator time, but also reduces chances of error. Having a 401(k) that can automatically adjust contribution amounts can help reduce paperwork.

3. Compliance support

Look for a provider that can offer support with compliance, including non-discrimination testing, filing Form 5500, and more.

4. Helpful customer service

Customer service is about going above and beyond the industry standard, however, at a minimum your provider should offer a smooth sign up/setup process, online access to the plan, online transactions, free rollovers, easy to understand fee disclosures, and help when you need it. Other customers can be a good source for reviews.

5. Easy to set up and administer

Look for features that make offering a benefit easier — not more labor intensive — for your HR team (or whoever serves as your company’s administrator). This might mean looking for automated features, such as participant enrollment. Offering a great 401(k) shouldn’t mean more paperwork.

6. Investment options

Investment strategies should not be one size fits all. We offer nearly every mutual fund and index fund on the market (over 30,000!), including those from Vanguard, Charles Schwab, BlackRock, Oppenheimer, Fidelity, and many more. In addtion, we offer built-in investment advice with personalized features to help you find the best option for you.

7. Low-cost investments

Just as interest compounds, so can fees. Look for a plan that offers low-fee investment options, such as low-cost index funds. They tend to have lower expense ratios (and outperform) actively managed funds.

8. Low, transparent fees

Be sure to get clarity on all the fees that your 401(k) plan provider charges, and when these charges apply. Several plans have come under scrutiny in recent years because of their high and/or hidden fees!

9. Employer match

While not mandatory, many employers match a portion of their employees’ 401(k) contributions. Make sure a plan has easy to understand eligibility requirements, a strong matching contribution formula, quick vesting of employer contributions, and low employee contribution minimum to qualify for a match. Read more about whether employer match contributions are tax deductible.

10. For younger employees: A Roth 401(k) option

A Roth 401(k) allows employees to make after-tax contributions (and this could be in addition to their pre-tax contributions). The benefit here may skew for more junior employees who anticipate that they’ll be moving into a higher tax bracket in the years to come, i.e. in retirement. (Note: Even if you choose a Roth 401(k) option, all employer contributions to your 401(k) will be made on a tax-deferred basis. This is a requirement from the IRS.)

What’s the best 401(k) plan for SMBs?

Below we compare an example plan with Human Interest to one you might find elsewhere in the industry.

Feature

Plan with Human Interest

Plan B

Automatic enrollment

Yes, though employees can opt out if they want

Opt-in

Payroll integration

Yes, we integrate with 15+ leading payroll providers

No

Employer match

Yes, $0.50 per dollar on 6% of pay

None

Customer service

Yes, phone and email support for employers and employees

No

Compliance support

Yes

No

Fee charged

0.57% per year

1.89% per year

*1.89% is the industry average for small 401(k) plans. Source: 401(k) Averages Book, 18th Edition.

Find the best 401(k) for your company

If you’re a small business owner and you want a 401(k) made for SMBs, consider Human Interest. Send us any questions about 401(k) plans you may have. We’d love to help!

 

The Human Interest Team The Human Interest Team

We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest® offers a low-cost 401(k) with automated administration, built-in investment advising, and integration with leading payroll providers.

Small and medium businesses can be prepared, too.

Start a great retirement benefit for less than the cost of one employee’s health insurance.

Human Interest - The 401(k) provider for small and medium-sized businesses

Get free 401(k) resources now. Learn more about 401(k)s for you and your company.

Get free 401(k) resources now. Learn more about 401(k)s for you and your company.