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How Much Does a Small Business 401K Plan Cost Employers?

Last Updated: April 26, 2023

Ashley Smith
Fact Checked By: Ashley Smith
Experienced journalist with over 12 years reporting on business and tech news.

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Choosing a 401K offering for your small business can be confusing. There are so many options. Nevertheless, it's a wonderful benefit to offer to employees. The social security benefits are uncertain for the future. Even assuming social security benefit laws will stay the same, they are not nearly enough to maintain a lifestyle congruent with an employee's current earnings.

Small Business 401K Plan Costs

Small Business 401K Plan Average Costs #

For a traditional 401K plan, most businesses should plan to spend $5,000 to $10,000 per year. The majority of these expenses will come from administrative fees. For example, a company with less than $1 million in assets might pay $800 to $1,000 in annual administrative fees, plus a quarterly charge of $15 to $40 for each plan participant. Initial set up fees run $500 to $3,000, depending on the size of your company and the benefits you select.

Simple 401Ks are less expensive. Expect to pay about $500 to $1,000 per year, plus $20 to $50 for each plan participant. Administrative services are billed at an hourly rate, generally $100 to $300.

Other Fees You Might Incur: #

  • $800 to $1,500 to rollover assets from another plan
  • $100 to $300 per hour for investment advice and initial consulting
  • $800 to $2,500 per year for discrimination testing to make sure your plan is properly balanced between managers and rank-and-file employees

Some companies choose to pass some of these fees on to employees. But, most pick up the tab, themselves. It's an investment in attracting and retaining a strong workforce. The largest accounts may be able to negotiate waving some of these fees.


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