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

Why a 401(k) for Small Businesses?

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A 401(k) is how most Americans save for retirement—but small and medium-sized business (SMB) owners and their employees are 11 times less likely to have access to a 401(k) than those at large corporations. 

Figure 1. The percentage of employers that don’t offer a 401(k) by company size.


Why is there such a distinct coverage gap?

Put simply, there was a gap, but there doesn’t have to be. It used to be that the administrative burden of managing traditional retirement plans, in addition to their high fees, were too much for small companies without dedicated HR or finance teams. As a result, retirement benefits were out of reach for smaller companies.

Now, even though technology-first modern 401(k) providers remove these barriers, many SMBs still carry many of these perceptions about 401(k)s. Throughout this article, we’ll examine six lingering misconceptions about SMB 401(k)s and disprove them. 

But first, what’s the difference between modern and traditional 401(k) providers? 

Modern 401(k) providers 

(e.g. Human Interest) 

Traditional 401(k) providers 

(e.g. Fidelity, John Hancock, Paychex)



Modern 401(k) providers have one or more of the following characteristics:

  • Automation that streamlines administration
  • Robo-advising for employees as well as additional services for onboarding and employee education
  • Made for small and medium-sized businesses with competitive pricing

Traditional 401(k) providers have one or more of the following characteristics:

  • Manual process in managing a plan and requires a lot of paperwork
  • Expensive for small and medium-sized businesses
  • Experienced; they have been in the industry for 10+ years

Now that we’ve covered the differences between traditional and modern 401(k) providers, let’s move on to examining each myth one by one.  

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Small business 401(k) plans: the complete guide

What Do Employers Need to Know?: 401(k) Basics For Employers 

If you’re an employer who hasn’t offered a 401(k) benefit before – or even if you have – it’s important to understand the 401(k) basics before you decide on a plan provider. How does a 401(k) benefit the employer? What are 401(k) rules for employers? Learn the answers to these questions and more in our guide, 401(k) basics for employers

Who Qualifies for a Self-employed 401(k)?

Are you self-employed and planning for your retirement? You may think saving for retirement with only an IRA is enough, but a 401(k) will help you grow your nest egg faster than an IRA. There are many advantages of a 401(k) for self-employed individuals. Learn if you qualify for a self-employed 401(k) in our guide. 

How Much Does a 401(k) Cost Employers? 

Examining 401(k) plan costs for both employers and employees is not a simple task. Plans can vary drastically from provider to provider and the 401(k) administration fees providers charge aren’t always clear. What is the small business cost to manage a 401(k) and how much does a 401(k) cost employers? See our guide to find out. 

How Do You Set Up a 401(k)

Setting up 401(k) for your small business can be easier than you might think. Learn how to set up a 401(k) in our guide.

How Do You Change 401(k) Providers? 

So you decided to offer a 401(k) to round out your benefits package to be competitive in the job market. But after a few years, you realize that you may not have chosen the right plan. Here, we’ll outline how to change 401(k) providers.  

What Are 401(k) Deadlines for Employers and Employees? 

To maximize the benefits of your workplace 401(k) program, you have to keep in mind 401(k) contribution deadlines for key events, including taking required minimum distributions, last day to contribute to 401(k), the 401(k) enrollment period, 401(K) set up deadline, and 401(k) open enrollment and more! Here’s a comprehensive list of 401(k) deadlines for employers and employees, including action items and links where you can find additional information. 

What is 401(k) Compliance Testing? 

Also known as non-discrimination testing, 401(k) compliance testing ensures that businesses are compliant with established federal requirements and regulations. Namely, that a company’s 401(k) plan doesn’t favor employees of a certain status (usually determined by compensation.) Learn more about the basics of 401(k) non-discrimination testing in our guide. 

Safe Harbor 401(k): Everything You Need To Know 

A safe harbor 401(k) plan is a type of tax-deductible 401(k) plan that ensures all employees at a company have some set of minimum contributions made to their individual 401(k) plans, regardless of their title, compensation, or length of service. A major benefit of safe harbor plans is that they are automatically exempt from IRS non-discrimination testing. Learn everything you need to know about safe harbor 401(k) plans.

Myth 1: 401(k)s are too expensive for small businesses

While no longer true, in the past, traditional 401(k) providers designed – and priced – their plans for large businesses with a high number of employees. Fees to administer plans, manage assets and other charges made offering a 401(k) too expensive for small businesses. Modern 401(k) providers use technology to offload many of these upfront charges that make traditional plans so expensive.

Reality: Traditional 401(k) providers often charge high and hidden fees.


Asset-Based Fee

Total Annual Cost

Total Cost



*Assumes 10 participants with $500,000 in assets. Visit our pricing page to see how Human Interest compares. 

The federal government offers tax incentives to start a 401(k) 

After finally recognizing that 77% of Americans don’t have enough money to retire, Congress moved to expand existing tax incentives to help businesses close the retirement savings gap. The SECURE Act of 2020 provides:

It’s important to note that the IRS also allows employers who offer matching programs to deduct those contributions on their taxes.

Want to know how much you could be saving with the SECURE Act?

Find out now

How Human Interest helps 

By automating the administrative processes of managing a 401(k), Human Interest charges employers significantly less than traditional providers and is far less than the annual cost of just one employee’s health insurance!

On top of that, our investment philosophy is centered around keeping costs down for plan participants. A Human Interest 401(k) is designed to keep costs down with: 

Figure 2. The average annual cost of providing a 401(k) vs. health insurance for one employee.  

*Note: Estimates here are shown for illustration purposes and do not include plan start-up fees. Contact us for more details on pricing for your business. The average price of health insurance is sourced from the Kaiser Family Foundation’s 2019 Employer Health Benefits Survey.


Myth 2: 401(k)s are too complicated to set up and maintain 

Reality: 401(k) plan administration has changed a lot over the last decade

While it used to be that the paperwork from starting a plan can overwhelm business owners, who already juggle many responsibilities throughout their day, that’s no longer true.

Small and medium-sized businesses can find what they need: a 401(k) provider that uses automation to streamline the process of setting up and administering a plan with features like:  

How Human Interest helps 

With Human Interest, starting a 401(k) has never been so easy. What used to take months of back and forth with traditional providers, now takes as little as 15-minutes. And after that, we put the plan on autopilot. Letting small business owners focus on what matters most: running their business. 

Human Interest’s modern 401(k) platform:


Myth 3: Small businesses don’t need 401(k)s 

Reality: Business owners can’t rely on an IRA or the profits from selling their business to be their only source of retirement income 

There are a lot of reasons why some businesses owners believe they don’t need a 401(k), but two of the most common we hear are:

Let’s examine each and see why these beliefs aren’t correct. 

“My business is my nest egg” 

The second most popular way small business owners secure funding to start their business is through a retirement account rollover as a business start-up (ROBS). But it’s not enough to rely solely on your business to meet your retirement goals. Consider the following: 

Don’t leave retirement to a “what if?” Business owners now have options that allow them to build their retirement savings while they build their business. There’s no need to compromise either. 

“My IRA (or SIMPLE IRA) is enough” 

While 401(k)s and Individual Retirement Accounts (IRA) are both tax-preferred ways for individuals to save for retirement, they differ in their annual contribution limits. The limit for each in 2020 is determined by the age of the individual.




Under 50



Age 50+



Business owners should note that they have the additional benefit of being able to contribute up to $57,000 to their 401(k) in 2020. 

What does a larger contribution limit mean? 

In short, it could mean a $500,000 difference when you retire. The higher contribution limit of a 401(k) can help your nest egg grow bigger faster. Here’s an example of what it would look like if a person maxed out their retirement savings using a Human Interest 401(k) versus an IRA over a 20-year period (assuming the same 5% rate of return). In this example, by using a 401(k), their nest egg would grow to roughly $719,700 whereas it would get to just $219,900 using an IRA. 

Figure 3. A comparison of potential savings with an IRA and a Human Interest 401(k).  

*Note: The figure depicts hypothetical savings based on a $6,000 annual contribution for an IRA versus a $19,500 annual contribution for a Human Interest 401(k) over a 20 year period.

What about a SIMPLE IRA?

A Savings Incentive Match Plan for Employees (SIMPLE) IRA is a popular alternative to a small business 401(k) and businesses with 100 or fewer employees are eligible to offer one. Like a 401(k), employers have the option to match and can either choose to make a 2% retirement account contribution to all employees or an optional matching contribution of up to 3%. 

For their part, employees can contribute more than two times the amount of a regular IRA. The yearly contribution limit of a SIMPLE IRA in 2020 is $13,500, which is $6,000 short of the $19,500 contribution limit of a 401(k)

Take away: Business owners shouldn’t leave retirement to chance and you should look for the most efficient way to grow your retirement savings.

You need to save for retirement, and there are many tools available, but you definitely need to save and not just rely on your business as your nest egg. When you save, a 401(k) can help you build your nest egg faster. And there are special allowances for business owners to help them grow it even faster.


Myth 4: 401(k)s require an employer match, and I can’t afford that  

Reality: Employer matching programs are completely optional

You can offer a 401(k) plan for your employees to invest and save for their own retirement even if you’re not able to afford a company match. That said, 51% of plans offer a match and it can be a great way to incentivize employees to save. The average match is 4.7% but the typical range is between 0 and 6%.

If you are thinking about offering a match, consider vesting schedules – i.e. the requirement you set for the period of time that employees must have worked at your company before the employee owns any matching contribution. The majority of plans require 12 (or more) months of service before employees are eligible for employer matching. 

How Human Interest helps 

Human Interest knows that retirement plans are not one-size-fits-all. We allow businesses to customize their plan according to their needs. In fact, 54% of our customers don’t offer a match at all. 


Myth 5: My employees won’t take advantage of a 401(k) 

Reality: After health insurance, work-sponsored retirement plans are the most-requested benefit amongst employees.

In fact, 40% of employees working for small businesses say that they would leave their current company for another that offers a 401(k) plan. And a 401(k) may be even more important for businesses competing for younger talent: 90% of employees 18 to 34 years old say they would prefer benefits over a raise.

So why do business owners and HR professionals still believe that their employees won’t take advantage of retirement benefits if offered? Because no one has ever had data into the saving habits of America’s SMB workforce until now. According to our research, the majority of SMB employees contribute to a 401(k) when given the opportunity. And that’s across age, industry, sex, and marital status. 

Figure 4. How many SMB employees are participating in their company’s retirement plan?

What happens when SMB employees, who make up the bulk of the 60% of Americans without a workplace retirement plan, finally have access to a 401(k)? 

Find out in our exclusive report

How Human Interest helps 

Our customers have participation rates averaging between 70-90%, far higher than the industry average of 33.6%. Human Interest’s 401(k) platform was designed to encourage high participation rates with features like automatic enrollment and built-in investment advising.* 

*Investment advising provided by Human Interest Advisors, LLC.

Myth 6: It’s too difficult to choose and manage investments

Reality: Modern 401(k) platforms offer built-in tools that help plan participants choose investment strategies for their retirement goals.

In the past, traditional 401(k) providers offered an open architecture for employers to select which funds to invest in. This required a deep understanding of thousands of investments with confusing names, which is a daunting task unless you have a financial advisor—which many businesses can’t afford.  

How Human Interest helps

Human Interest gives our customers the flexibility of customizing their investment portfolio. We recommend low-cost index funds that focus on long-term growth and we never accept any kickbacks. You have the choice between starting with our default lineup of 30 funds that focus on long-term growth, or if you prefer, customize your investments from over 30,000 funds. Click here to learn more about our investment funds and philosophy.

We put retirement savings on autopilot for plan participants with features like automatic investing* so participants can easily contribute to their plans according to their risk tolerance. Our intelligent risk setting feature helps them find an investment strategy to meet their retirement goals based on their age, lifestyle, and other personal settings. And lastly, we offer an automatic rebalancing tool that customers can turn on to help them keep risk in check and possibly enhance returns.  

*Investment advising provided by Human Interest Advisors, LLC.

What’s in a myth? 

Throughout the course of this article, we examined 6 persisting myths about 401(k)s for small businesses. While they used to be out of reach for many small businesses, 401(k)s are now accessible to – and critical for – SMBs and their employees. 

Human Interest’s modern 401(k) platform provides a simple, streamlined administrative experience, without sacrificing quality or price. Contact us today if you have any questions or are ready to get started. 

Want to see how Human Interest’s 401(k) platform works for yourself?

Watch our on-demand product demo webinar 

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.