March 5, 2019

Think Retirement Plan Costs Are Too Expensive?

Retirement Plan Costs (not as much as you think)

It is easy to see why some CFOs, HR Directors, and even small business owners may think that their respective companies cannot afford to provide a 401(k) for their employees. When discussing the opportunity for local businesses to begin offering a retirement plan, we typically encounter a handful of similar objections: “It’s too expensive. We’re too small. Our staff doesn’t have the capacity to take on all the extra work.”  Most of these objections are based on the fear of the unknown and incorporate several unwarranted assumptions.  First, retirement plans don’t have to be expensive for small business anymore.  Long-gone are the days of retirement plan companies pricing their products with only large corporations with many employees in mind.  Today, there are many low-cost 401(k) solutions designed specifically for small businesses.  And the economics of a plan can make sense even for a company with very few employees. Additionally, the recordkeepers can take on a large portion of the administrative work to not over-burden staff with new responsibilities.

Understanding the costs associated with a retirement plan for a small business can be one of the trickiest parts of the whole process.  There are asset-based fees and per-participant fees.  Further, some of the administrative costs are based on the number of specific transactions, and some are merely a flat dollar amount. While the fee structure can be complicated, that doesn’t mean it has to be expensive.  One of the most critical services that we as retirement plan consultants provide is fee-clarity.  All our clients know exactly what they pay and what the participants pay, and we are involved in negotiating low, fair fees every step of the way.  This knowledge and understanding allow even small retirement plans to get started and set up at very competitive prices. Being a small business doesn’t mean that you cannot afford to have a retirement plan.  In many ways, in today’s competitive landscape for hiring and retaining talented employees, small business owners can’t afford not to offer a great retirement plan.

David Scully

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