adp 401k plan for small business

I am looking for…

I need support for…

  • Login or other general help
  • Paycheck Protection Program

adp 401k plan for small business

401(k) for small business owners

Want to attract and retain talent with retirement benefits?   Talk to Sales

  • Small Business Employee Benefits
  • 401K for small business owners

Retirement benefits aren’t a luxury reserved just for midsized and large businesses. A variety of retirement  plan solutions exist today, from 401(k) to SIMPLE IRAs and SEP IRAs, that can help small business owners not only secure a nest egg for themselves, but also attract and retain talented employees .

401 (k)

What types of 401(k) plans are available for small business owners?

Small business owners generally have many retirement plan options to choose from, some of which may be more appropriate than others, depending on the size of their organization. Examples include:

Traditional 401(k)

Individual or solo 401(k), safe harbor 401(k), roth 401(k), who is eligible for an individual or solo 401(k) plan.

Generally, only businesses that consist of an owner and a spouse, if that individual also works for the organization, may participate in a solo 401(k). Those who adopt these plans may need to set eligibility requirements, such as years of service. If the business hires non-owner employees  who at some point meet those requirements, then the employer may no longer be eligible for an individual 401(k) and would have to choose a different type of plan, e.g., traditional 401(k) or SIMPLE IRA.

Can owners of an LLC contribute to a 401(k)?

Solo 401(k) plans are not limited to sole proprietorships. Businesses that are structured as limited liability corporations (LLC), as well as partnerships, may also participate in these plans if they meet all the eligibility requirements.

Can those who are self-employed contribute to a 401(k)?

There are several different types of retirement plans – Solo 401(k), SEP IRA, SIMPLE IRA and traditional 401(k) – that are available to self-employed individuals. The Solo 401(k), in particular, was designed specifically for entrepreneurs and their spouses. Those whose business is a side venture may also contribute to a 401(k) offered by an employer, but the combined contributions between both plans must not exceed the annual limits set by the IRS.

How does a solo 401(k) plan benefit the small business owner?

The primary benefit to a solo 401(k) is that it permits small business owners to contribute large portions of eligible compensation to the plan, thereby maximizing their retirement savings. Other advantages include:

  • Within certain limits, participants may be able to borrow from the plan.
  • Filing Form 5500, Annual Return/Report of Employee Benefit Plan may not be necessary, depending on the plan’s balance.
  • Since these plans usually only cover one individual, discrimination testing is moot and not required.

Drawbacks to a solo 401(k)

A solo 401(k) may not be right for small businesses that plan to expand and hire employees in the near-term, since doing so would likely result in plan ineligibility. In addition, calculating profit-sharing contributions for sole proprietorships and partnerships tends to be complex because it requires modified net profits. The formula for this calculation is available in IRS Publication 560 .

What else do small business owners need to know about 401(k) plans?

Small business owners who offer retirement savings plans may be able to take advantage of tax incentives. Matching employee contributions, for instance, is generally tax deductible as a business expense. For the first three years of the plan, employers may also be eligible for tax credits up to 50% of the start-up and administration costs or $5,000 (not to exceed $250 per non-highly compensated employee), as well as a $500 automatic enrollment credit per year.

How do small business owners choose the best 401(k) for their needs?

To find the right 401(k) for their small business, employers generally look for plan providers that:

  • Charge reasonable plan and investment fees and have no hidden costs
  • Provide real-time integration between the 401(k) recordkeeping and payroll systems to eliminate manual data entry and reduce errors
  • Offer a simplified compliance process
  • Make administrative fiduciary oversight available
  • Offer ERISA bond and corporate trustee services
  • Help with investment fiduciary services and plan investment responsibilities
  • Make investment advisory services available for employees

Frequently asked questions about 401(k) for small business owners

How much can a small business owner contribute to a 401(k).

The combined limit for employee and employer contributions to a 401(k) is the lesser of 100% of an employee’s compensation or $66,000. This maximum increases to $73,500 if the employee is 50 years of age or older and participates in a plan that allows catch-up contributions.

Can I borrow from a SEP IRA, SIMPLE IRA or 401(k)?

Loans are permitted with 401(k), but not a SEP IRA or SIMPLE IRA. Although these types of loans are enticing because of the low interest rate environment, they can have long-term consequences on retirement savings. Individuals may want to consult a financial advisor before borrowing against their 401(k).

What is the best type of retirement plan for small business owners?

SEP IRAs and SIMPLE IRAs are generally good starting points to consider for small businesses, but 401(k) plans may offer greater choices in plan design. The right choice ultimately depends on the specific needs of the organization and its workforce.

If I offer a 401(k) to my employees, are there compliance regulations I must follow or can the retirement plan provider help with these?

Certain employers who offer 401(k) and other retirement plans must abide by the Employee Retirement Income Security Act (ERISA) of 1974, as amended, which helps ensure that plans are operated correctly and participants’ rights are protected. In addition, a 401(k) plan must pass non-discrimination tests to prevent the plan from disproportionately favoring highly compensated employees over others. The plan fiduciary is usually responsible for helping comply with these measures.

This information is intended to be used as a starting point in analyzing employer-sponsored 401(k) plans and is not a comprehensive resource of all requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services. For specific details about any 401(k) they may be considering, employers should consult a financial advisor or tax consultant.

Unless otherwise agreed in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products, financial advisors or service providers; engage or compensate any financial advisor or firm for the provision of advice; offer financial, investment, tax or legal advice or management services; or serve in a fiduciary capacity with respect to retirement plans. All ADP companies identified are affiliated companies.

ADP, Inc. is affiliated with ADP Broker-Dealer, Inc. (“ADP BD”), a limited purpose broker dealer registered with the Financial Industry Regulatory Authority (“FINRA”), and operating pursuant to Securities and Exchange Commission (“SEC”) Rule 15c3-3(k)(2)(i), approved by FINRA to offer 401(k) and SEP/ SIMPLE IRAs, and related retirement plans (the “Retirement Products”) on a payroll deduction basis.

adp 401k plan for small business

Attract and retain talent with ADP’s competitive retirement plan options.

Related resources

Finanical Realities Mid to Late Career Workers

Get pricing specific to your business

Your privacy is assured.

ADP logo

ADP 401k Review

Table of contents.

adp 401k plan for small business

ADP is our choice for the best PEO/HRO for benefits administration. ADP’s HRO plans include various HR features. Additionally, ADP TotalSource is a comprehensive PEO with bundled HR features. Both provide an intuitive benefits administration process.

  • ADP offers a variety of employee retirement plans to meet all small businesses’ needs.
  • The retirement plans integrate with ADP’s popular payroll system, thus automating manual tasks and saving time.
  • The company has a mobile app that makes it easy for employees to enroll in their retirement plan, make changes and track their funds’ performance.
  • The vendor’s customer service includes a dedicated manager, which takes the complexity out of setting up a retirement savings plan for your staff.
  • ADP doesn’t list its prices on its website, making it hard to know how much the plan will cost your business without speaking to a company representative.
  • ADP doesn’t disclose its investment fees on its website, forcing you to contact the company for important cost information.
  • User reviews suggest ADP’s customer support may not be as great as promised.

It’s clear that ADP had all small businesses, from sole proprietors to 100-person organizations, in mind when developing its employee retirement plans. This plan sponsor understands that small businesses are unique and want retirement programs that meet their specific needs. When you partner with ADP, you can choose from a traditional 401(k), an individual or solo 401(k), a SIMPLE IRA, a safe harbor 401(k) and a Roth 401(k). Adding to the company’s appeal, ADP’s retirement plans integrate with its highly rated payroll services . In fact, this single vendor can handle virtually all of your HR needs. It doesn’t get any easier than that for time-crunched small business owners.

ADP Editor's Rating:

Why we chose adp as best for small businesses.

Small business owners don’t have excessive amounts of time to shop around for a retirement plan sponsor that meets their needs. They may find it easier — and safer — to go with a well-known brand like ADP that can offer a variety of plans and valuable features that can be customized. After all, a sole proprietor won’t want the same plan as a business with 100 employees. Thanks to its many attractive plan options, ranging from a traditional 401(k) to a SIMPLE IRA , ADP is capable of satisfying all types of small (and large) businesses.

ADP’s employee retirement plans integrate with the company’s popular payroll software, automating data entry and flagging any potential mistakes. This saves small business owners and their HR staff countless hours by eliminating the need to manually enter payroll and retirement information. When we researched retirement plan providers, we found in our review of Paychex that it was the only other vendor to offer a native integration with its payroll service. Other solutions, if they offer payroll integrations at all, require connecting products from two different companies (e.g., Human Interest’s employee retirement service with Gusto’s payroll service). By keeping everything in one unified system, business owners can streamline and improve their HR operations.

Among the other reasons ADP is the best retirement plan vendor for small businesses is the company’s customer service. Business owners have access to a dedicated account manager who can assist during implementation and beyond. Small business owners will also appreciate the company’s mobile app, which makes accessing plan information particularly easy for both employers and their employees.

If your business is just starting out, you should aim for a retirement plan program that can grow with your company. This is another aspect that makes ADP the best employee retirement plan provider for small businesses: You can start with the company’s solo 401(k) plan for yourself and roll it into a traditional 401(k) plan as you hire staff.

ADP retirement account dashboard

Plan participants can get a snapshot of their retirement account on their ADP dashboard. Source: ADP

Ease of Use

Small business owners don’t have hours to spend to set up an employee retirement savings plan; they need it to be quick and easy to implement and simple for employees to enroll in. The more hurdles there are, the less likely anyone is to participate. It’s apparent that ADP had these considerations in mind when it developed its user-friendly digital dashboard. With this portal, ADP makes it simple to set up a retirement plan for your staff by breaking down the process into easily digestible tasks you need to complete.

Our research also revealed how safe and straightforward ADP makes it to upload and store the documents that are necessary to establish your retirement plan. How-to videos and links to more help embedded in the company’s dashboard are other features we like. Most small business owners aren’t retirement plan experts; they need fast access to assistance and comprehensive information at their fingertips. In addition to an easy-to-use dashboard and its built-in resources, ADP gives small business owners access to a dedicated account manager to make sure everything runs smoothly for your organization.

If you want a retirement plan that’s easy to implement and manage — with a digital dashboard, a mobile app and access to dedicated support — ADP is the ideal solution for your small business.

ADP retirement intuitive dashboard

ADP’s intuitive dashboard makes it easy to get your small business’s employee retirement plan up and running. Source: ADP

Features and Services

ADP’s retirement plans come with a range of services and features that small businesses will value regardless of how many employees they have.

Fiduciary Services

ADP serves as your fiduciary for both administration and plan management for the company’s 401k Essential plan. If you select the regular 401(k) plan, someone at your business will need to be responsible for all the administrative and managerial tasks. The smaller your business, the more that option might make sense, because the fewer employees you have, the less there is to manage.

Advisory Services

We like how ADP provides advisory services to reduce the risk small businesses face when selecting investments for their retirement plans. For ADP’s plans that work with an adviser, third-party company Mesirow offers co-fiduciary or investment management services. Otherwise, ADP Strategic Plan Services provides fiduciary and investment services.

Implementation Services

ADP empowers you and your HR leaders with access to useful technology and tools that help you get your business’s retirement plan up and running. The vendor also has a team of dedicated managers to help with implementation.

ADP Payroll Integration  

With ADP’s SMARTSync tool, you can integrate your retirement plan data with ADP’s payroll software, thus eliminating manual entry and reducing potential errors. This is vital for saving time and increasing accuracy. Learn more in our ADP payroll review .

ADP retirement SmartSync

ADP’s SMARTSync tool makes it easy to integrate payroll information with your employee retirement plan. Source: ADP

ADP handles regulatory compliance, including trustee services, ERISA bond, and Form 5500 completion and filing. In our view, this service adds immense value, since most small business owners aren’t well versed in the laws and regulations surrounding employee retirement plans.

We were impressed with how easy ADP’s mobile app makes it for employees to enroll in your business’s retirement plan. After the team member answers a few questions about their annual income, retirement age and location, the app offers a personal savings target and suggested savings amount to achieve that goal. Once enrolled, employees can conveniently take several actions via the mobile app, including the following:

  • Transfer money into their retirement account
  • Rebalance investments
  • Request a loan
  • Check account balances
  • Review rates and returns
  • Make changes to investment choices

ADP retirement mobile app

With ADP’s mobile app, employees have access to their retirement account information no matter where they are. Source: ADP

Retirement Planner

We appreciate that ADP makes it simple for employees to plan for retirement and track their financial goals. The company’s Retirement Readiness calculator, for example, estimates how much money they’ll need for retirement based on their lifestyle goals and how well they are tracking toward those goals. It’s a fairly effortless way for workers to stay engaged in their financial planning and contribute to their future success.

ADP retirement calculator

ADP’s Retirement Readiness calculator helps employees plan for retirement. Source: ADP

ADP offers a variety of plans for every size business that may be interested in not just 401(k) plans but also SIMPLE IRAs and SEP IRAs. While the company’s website is very transparent about the features available with each type, what you won’t find are guaranteed prices. Rather, the site has a tool that lets you “estimate your baseline cost” for the 401k Essential option based on a $150 monthly fee, an additional $4 per employee per month, and a $20.83 investment service fee.

To get a more exact quote, as well as pricing information for the other available plans, you’ll need to contact the company. This is an added step that some rivals don’t require. For instance, see our review of USA 401k for a plan provider that shares all of its costs upfront.

When you contact ADP, you’ll also want to inquire about any setup fees. If you’re already using ADP for payroll or other HR services, you may be entitled to special pricing for adding employee retirement plans to your package. Bundling is often a great way to save money.


ADP makes it easy to establish a retirement plan for your business, especially with a team of implementation managers at your disposal. The company even has English and Spanish language assistance, which opens up the program to more business owners. With the help of this support staff, your business’s plan can be established the very same day you ink a deal with ADP.

If you’re a business owner rolling over an existing retirement plan, the Document tab in the ADP portal clearly outlines what forms you need to fill out. The Communication tab lets you know if your employees have been notified of the plan, while the Activate tab tells you when your HR staff will be trained on the plan and when payroll is set up. We like that the dashboard also includes target dates to keep you on track with your plan implementation. Another great feature is that once the system is launched, employees can enroll on demand and employers can send a text to each staffer for text-to-enroll capabilities that encourage participation. [Read related article: What Is 401(k) Automatic Enrollment? ]

Customer Service

ADP provides business owners with a lot of personalized customer service, which is one reason it’s our best pick for small businesses. When you work with ADP, you have access to a dedicated team that will help you implement and manage your retirement plan. To get support, all you need to do is call the retirement services participant service team at 800-695-7526. Agents are available Monday through Friday from 7:30 a.m. to 10:00 p.m. ET. Notably, those are longer support hours than most competitors offer.

We found a lot of helpful information directly on ADP’s digital dashboard. Additionally, the ADP website has a resource center, including sections specifically for small businesses; answers to frequently asked questions; a blog; and webinars.

ADP has been in business for over 70 years and has a strong reputation in the marketplace. It sports an A+ rating with the Better Business Bureau (BBB), but similar to Paychex, it has a rather low customer review score: 1.05 out of 5 stars. That’s surprising and disconcerting given all the support ADP promises to provide.


ADP is a top employee retirement plan provider for small businesses, but one limitation in particular gave us pause: the company’s lack of transparent, upfront pricing. Busy small business owners want to know how much a plan costs from the beginning, and ADP doesn’t provide that information online. Although the vendor is only a call away, we prefer that plan sponsors list pricing on their websites. The more information a small business owner has from the start, the more informed a decision they can make for their organization.

Another potential downside is the poor customer reviews on the BBB website, which notes that ADP has closed nearly 900 complaints in the past three years. If you’d rather not have to rely on customer support, you may want to check out our review of ShareBuilder 401k , which we found to be a great option for business owners who are interested in a do-it-yourself employee retirement plan solution. Going it alone could be better than dealing with subpar or inconsistent customer support.

Take the time to call ADP to get a specific quote if you are seriously considering the vendor for your retirement plan. Yes, it’s an extra step, but it’s the only way you’ll know precisely what the plan will cost you and your employees so you can accurately compare the costs with those of competing plan providers.


During our investigation of the best employee retirement plan providers, we compared and contrasted the companies based on their plan types, features and services, pricing, usability, setup, integrations, customer support and drawbacks. To determine the ideal plan sponsor for small businesses in general, we looked for those that kept costs and investment fees low, made it easy to implement and manage the plan, and offered mobile tools to boost enrollment and engagement rates.

We also wanted a vendor that leads with technology but is capable of offering dedicated one-on-one service. We vetoed any plans that were hard to understand, would take a lot of time and effort to implement, and would be time-consuming to manage. Small business owners aren’t experts at creating retirement savings plans; many need the help of a reputable plan provider. Furthermore, small businesses need the same access to investment advice and research as larger enterprises. For these reasons, ADP stood out to us as the best solution for small businesses.

What type of employee retirement plans does ADP offer?

ADP offers many types of employee retirement plans, including traditional 401(k), individual or solo 401(k), SIMPLE IRA, safe harbor 401(k) and Roth 401(k).

How does ADP’s payroll system integrate with the company’s employee retirement plans?

ADP’s payroll system integrates with the company’s employee retirement plans by connecting your data sets through the vendor’s SMARTSync tool. This eliminates the need for manual data entry, automatically flags potential errors and saves small business owners valuable time by streamlining recordkeeping. SMARTSync works with certain ADP payroll and all-in-one HR solutions, including RUN Powered by ADP and ADP Workforce Now.

Bottom Line

We recommend ADP for …

  • Small business owners who want to keep their payroll information and retirement benefits in one system.
  • Business owners who want to offer their employees enrollment and plan access via a mobile app and an online dashboard.
  • Small business owners who want personalized attention when implementing an employee retirement plan.

We don’t recommend ADP for …

  • Small business owners who don’t want to integrate payroll services with their employee retirement program.
  • Business owners who need to know upfront how much an employee retirement plan will cost.


Get Weekly 5-Minute Business Advice

B. newsletter is your digest of bite-sized news, thought & brand leadership, and entertainment. All in one email.

Our mission is to help you take your team, your business and your career to the next level. Whether you're here for product recommendations, research or career advice, we're happy you're here!

Looking for more options?

For more options, check out the rest of Business News Daily’s picks for the The Best Employee Retirement Plans for Small Businesses 2023.

ADP Employee Retirement Review

Table of contents.

adp 401k plan for small business

ADP offers small businesses a variety of employee retirement plans. Integration with its payroll software, strong customer service and a hand-holding customer service approach makes it our best pick for small businesses.

  • ADP offers a variety of investment options and retirement account types appropriate for businesses of all sizes.
  • The 401k Essential plan offers transparent pricing and full-service retirement plan administration.
  • The company offers a comprehensive suite of payroll, HR, and benefits tools and services.
  • ADP does not disclose fees for services other than its 401k Essential package.
  • The 401k Essential plan may be cost-prohibitive for businesses already equipped to administer retirement plans in-house.
  • ADP is primarily known as a large payroll company.
  • The company offers employee retirement benefits suitable for any small business.
  • ADP’s 401k Essential plan offers transparent pricing and full-service plan administration.
  • This review is for small business owners and HR professionals who are considering ADP as their employee retirement provider. 

Many businesses want to outsource the management of their employee retirement benefits to a company that has the expertise and resources to take the burden off of employees. The best employee retirement service providers are equipped to do just that, and ADP is a great example.

ADP is a large, established payroll services company that provides retirement benefits through an all-in-one platform. The company also offers employee retirement benefit accounts. It can be a cost-effective and easy-to-use solution for businesses of all sizes.

ADP Employee Retirement Editor's Rating:

Why adp is best for small businesses.

If your business has employees, it’s usually a good idea to use an independent payroll services provider. Whether you already use ADP or still need a payroll provider, it’s an easy way to streamline payroll, retirement and health benefits. The 401k Essential plan makes it easier to offer an employee retirement plan by simplifying employee account setup and maintenance, and ADP Run is a cost-efficient payroll option as well. The brand is undoubtedly one of the best employee retirement plan providers .

ADP Retirement Plan Features

ADP offers employers a 401(k) retirement plan that puts the company administrator in charge of selecting and monitoring investments over time. Plan administrators get access to a specialized ADP manager to help with implementation, as well as technology and tools that assist in building, implementing and administering a companywide 401(k). ADP’s 401(k) plan can also be synced with the ADP payroll software and ADP HR outsourcing tools through SMARTSync Comprehensive Plan Automation.

While this may be a good option for very small businesses with investing and recordkeeping experience, managing a retirement plan can be extremely overwhelming for larger operations. These companies may fare better with ADP’s 401k Essential plan.

401k Essential

ADP’s 401k Essential plan offers a full-featured 401(k) with additional assistance with administration and compliance. The plan is also fully customizable, making it easy to adjust every aspect of the plan to meet the needs of your business. This includes tailored automatic enrollment options, employee eligibility requirements, employer contributions, vesting schedules and safe harbor plans.

Because of the efficiency and peace of mind that come with these added services, ADP’s 401k Essential plan is a great fit for large businesses seeking efficiency and automation. It’s similar to the fully managed plans that ShareBuilder 401k offers, though often more expensive. In fact, ShareBuilder 401k is our top pick for low fees; read our ShareBuilder 401k review for more information.

Additional Features

  • Onboarding and support: Every ADP plan administrator gets access to a specialized ADP manager who helps with retirement service implementation. This service is on par with most employee retirement vendors.
  • Automation: ADP’s SMARTSync Comprehensive Plan Automation lets current ADP payroll and all-in-one HR clients integrate their payroll system with 401(k) plan recordkeeping systems. Administrators can use this feature to save time, improve accuracy and reduce the risk of compliance oversights.
  • Investment manager services: Companies can opt to work with financial services firm Mesirow to get co-fiduciary or investment manager services. Alternatively, ADP’s affiliate, ADP Strategic Plan Services LLC, can assist with investment fiduciary services. Either option can take the pressure of selecting and monitoring investments off your business’s HR team and reduce the risk of being audited by the IRS or the Department of Labor.
  • Compliance: ADP provides independent recordkeeping services to help your business stay on top of compliance requirements without the risk of bias. Its automation tools also reduce the risk of compliance-related errors, and the 401(k) Essential plan includes compliance readiness and testing, as well as government filings.
  • Online resources: ADP customers have access to a large library of online resources to help with plan administration, tax and compliance requirements, and investment decisions. Because ADP is a full-service HR platform, there are also resources related to payroll, recruiting and hiring, and other types of employee benefits .
  • Mobile app: The ADP mobile app makes it easier for employees to enroll. The integrated MyADP Retirement Snapshot calculator also lets employees calculate their retirement savings and plan for the future. On this front, ADP wins over ShareBuilder 401k, which entirely lacks a mobile app.
  • Employee tools: In addition to accessing ADP’s mobile app, employees can take advantage of the ADP Achieve employee education resources and financial wellness program. The company also leverages its employee records data to offer plan participants personalized insights and benchmarking so they can make smarter investment decisions.

ADP offers a variety of services in addition to employee retirement benefits. Consider using ADP if you also want to take advantage of the company’s other offerings, such as payroll services.

Account Types

Businesses that choose ADP as their employee retirement benefits provider can select from a few types of employee retirement plans. Each plan has its own rules and regulations, as determined by the IRS.

  • 401(k): ADP offers a 401(k) plan wherein plan administrators must select and monitor investment options and handle compliance-related issues. Business owners can also select the 401k Essential plan, which includes more substantial customization, administration and compliance support.
  • SIMPLE IRA: With administration fees as low as $480 per year, ADP’s SIMPLE IRAs involve less paperwork and fewer compliance requirements than a 401(k) plan. There are also no minimum requirements for participation. Notably, ADP’s main name-brand competitor in the HR services and benefits space, Paychex, also offers SIMPLE IRAs.
  • SEP IRA: A SEP IRA through ADP is designed for small business owners and self-employed individuals who want flexible contribution amounts and no required compliance filings. This gives ADP an advantage over Human Interest, which doesn’t offer retirement plans for solo business owners and entrepreneurs. That said, Human Interest is our top pick for affordability; read our Human Interest review to learn why.

Investment Options

Companies that offer employee retirement plans through ADP get access to a wide selection of investment options, including the following:

  • Money market
  • Stock and income mutual funds
  • Index funds and lifestyle funds
  • Specialty funds, including real estate and technology
  • Socially responsible equity funds
  • Treasury Inflation-Protected Securities (TIPS) bonds

While ADP offers most of the typical investment options available in employer-sponsored retirement plans, the list of individual funds is relatively short. We felt that other retirement vendors we reviewed, such as Human Interest and USA 401k, were more transparent about the investment options they offer. It’s also unclear whether ADP allows companies to offer employee stock purchase plans through their retirement accounts.

ADP does not publish its pricing online for some of its services. The two services for which it does list prices are 401k Essential and, to a lesser extent, SIMPLE IRA.

For 401k Essential, the base monthly fee is $150, with an additional fee of $4 per participant. On top of that, ADP charges 0.10% of eligible assets as an annual fee for investment management services. The minimum you must pay for this fee, which is billed monthly, is $20.83 per month. These prices are about on par with, if just a touch more expensive than, some competitors’ prices.

For SIMPLE IRAs, the ADP website indicates that administrative fees start at $480 per month. This is the only pricing information given for this type of employee retirement plan.

Outside this, in general, ADP prices vary based on plan customizations. If your business already uses ADP for payroll and other HR services, contact your account representative to learn more about ADP’s retirement plan pricing. You can also get a quote via telephone or by navigating to Start Quote from the homepage.

If you prefer more transparent pricing from your employee retirement vendor, USA 401k may suit you better. Read our USA 401k review to learn why this brand is our top pick for transparency.

Ease of Use

Even though pricing is not disclosed on ADP’s website, it’s easy to build a plan and get a quote. Just click the Start Quote button on ADP’s website and provide contact information and relevant details about your business. Once your request is submitted, an ADP representative will contact you to schedule a consultation. You can also get a quote by calling the company.

Once you sign up for ADP’s retirement benefit services, you can automate a number of tasks through the SMARTSync Comprehensive Plan Automation tool. You will also be assigned a specialized ADP manager who will help streamline the setup and implementation. Customizations and implementation assistance are even more robust with the 401k Essential plan, which includes administrative fiduciary support, investment management support, compliance readiness and testing, and government filings.

From the employee perspective, ADP’s mobile app makes it easy to enroll in 401(k) benefits and to change investments, while the Retirement Snapshot calculator and online resources help employees research funds.

These ease-of-use factors place ADP on par with or just above many of its competitors. We were especially impressed with the extent of automation available through the 401k Essential plan.

ADP benefits dashboard

The ADP benefits dashboard provides an overview of employee benefits and allows team members to manage their retirement benefits directly. Source: ADP

Customer Service

Beyond setup and implementation, automation tools make it easy to administer an ADP retirement plan by integrating the platform with a business’s existing ADP payroll and HR services. There is also a client administrator support page that answers common questions.

Likewise, employees can access several popular customer support topics to get quick answers and the most relevant contact information. There are also a number of educational resources and tools, including the ADP mobile app and the MyADP Retirement Snapshot calculator.

ADP lists several numbers on its website at which it can be reached. We like that the company keeps itself so available to both prospective and current customers.

While ADP is a very strong company, its retirement benefit services do have some drawbacks. For one, ADP does not disclose online the fees for some of its retirement solutions. This could inflate the overall cost a small business expects to pay once it signs up for ADP’s employee retirement plans.

Additionally, smaller businesses with the capacity for in-house administration may struggle to justify paying for the 401k Essential plan. Keeping employee retirement plan administration in-house may be the better option for these businesses.


To choose our top employee retirement vendor pick for small businesses, we compared several retirement plan providers known for their breadth of services. Many small business owners are so pressed for time that they need to streamline their operations as much as possible, ideally through relatively few vendors. In other words, the best employee retirement vendor for small businesses should be able to cover retirement alongside all related business needs.

In particular, the best small business employee retirement plan provider should also offer HR, payroll and employee benefits services. It should be a household name in all these spaces so that the quality of its work speaks for itself. Its website should also be clear, upfront and easily navigable. ADP met all these criteria better than any other provider.

Read our review of Paychex employee retirement benefits to learn about another well-established company that provides comprehensive service.

Is ADP better than Gusto?

ADP is a much larger, more established company than Gusto. That said, Gusto is among our picks for the best HR services and best payroll services . Given ADP’s size and legacy, the brand has considerably more robust offerings. However, ADP is also less transparent about its pricing and likely to be more expensive in many cases.

How do I contact ADP?

You can call 877-537-1196 or 877-749-1852 to start the process of registering for ADP’s employee retirement services. Current customers can call 800-929-2170 or 844-227-5237.

Overall Value

We recommend ADP for …

  • Small businesses of all stripes, especially those that use ADP to manage their payroll and other HR needs.
  • Large businesses that need help with IRS compliance and other recordkeeping requirements.

We don’t recommend ADP for …

  • Small businesses that can administer plans in-house.
  • Businesses that require fully transparent pricing to make informed employee retirement vendor decisions.

Dock Treece also contributed to this article.


Building Better Businesses

Insights on business strategy and culture, right to your inbox. Part of the network.

How to Find & Calculate ADP 401(k) Fees

adp 401k plan for small business

December 28, 2022


If you have questions about ADP 401(k) fees – how they work, how much they cost on average, or how you can find & calculate them for your plan – you’ve come to the right place. In this guide, we’ll show you how to calculate the full cost of an ADP 401(k) plan using their DOL-mandated fee disclosure.

By the end of this guide, our aim is for you to have a complete understanding of how ADP’s pricing works, how much you’re paying, and how your fees stack up.

Let's dive in.

What are Average ADP 401(k) Fees?

In our most recent Small Business 401(k) Fee Study , we found that ADP plans cost small businesses an average of 1.47% of plan assets each year, with their admin fees totaling about $314.08 per participant.

While their per-capita admin fee is below the study average of $422.30, that number can easily grow much higher due to the way these fees are charged.

In our experience , about 60% of admin fees charged by ADP are paid by revenue sharing – “hidden” 401(k) fees that lower the investment returns of plan participants. Not only are plan sponsors or participants often unaware that they’re paying them, but they’re always charged as a percentage of plan assets. That means plan participants will automatically pay ADP higher and higher administration fees for the same level of service as their account grows. That’s not fair!

When you factor in compound interest , these growing fees can make a huge dent in your retirement savings. As such, you want to do everything in your power to avoid paying them.

If you’re currently using ADP for your 401(k), your first step to avoiding these fees is to find out whether or not you’re paying them. We’ll show you how to do that later.

High 401(k) Fees

How to Find & Calculate ADP 401(k) Fees

To understand how much you’re paying for your ADP plan, I recommend you sum their administration and investment expenses into a single “all-in” fee . Expressing this as both a percentage of plan assets, as well as hard dollars per-participant, will ultimately make it easier for you to compare the cost of your ADP plan to competing 401(k) providers and/or industry averages.

To make this easy on you, we’ve created a spreadsheet you can use with all the columns and formulas you’ll need. All you need to do is find the information for your plan, then copy it into the spreadsheet.

ADP 401k Fees_Template Spreadsheet

Doing this for ADP can be a bit of a pain, but not to worry – we’ll show you everything you need to do in 4 simple steps.

Step 1 – Gather All the Necessary Documents

To calculate your ADP 401(k) fees, you’ll need their 408(b)(2) fee disclosure - a document that ADP has named the  “ADP Compensation and Fee Disclosure Statement.” ADP is obligated by Department of Labor regulations to provide a 408(b)(2) disclosure to employers. It contains plan-level information about the administration fees charged by ADP and is intended to help employers evaluate the “reasonableness” of these fees. This document can be found on the ADP employer website.

  If you hired an outside financial advisor for your plan, you’ll need to factor their pricing into your ADP fee calculation. This information can usually be found in a services agreement or invoice.

Once you’ve gathered the necessary documents, you’re ready to move on to step 2.

Step 2 – Locate ADP’s Direct 401(k) Fees

401(k) administration fees can be “direct” or “indirect” in nature. Direct fees can be deducted from participant accounts or paid from a corporate bank account , while indirect fees are paid from investment fund expenses - reducing their annual returns. Direct fees are the most transparent and are probably the ones you’re most familiar with.

ADP’s direct fees can be found in the “Direct Compensation Schedule” section of their 408(b)(2) fee disclosure:

ADP 401k Fees_Direct Fees

In step 4, you’ll add the total to a spreadsheet to calculate the direct fees charged by ADP.

Next, we’ll see if ADP charges your plan any hidden administration fees.

Step 3 – Uncover ADP Hidden 401(k) Fees

In our experience , roughly 60% of the administration fees charged by ADP are paid by revenue sharing – a form of “indirect” fee paid from the operating expenses of some mutual funds . Revenue sharing increases the cost of a mutual fund, thereby lowering its annual returns. There are two basic forms:

  • 12b-1 fees – these payments usually compensate a financial advisor.
  • Sub-Transfer Agency (sub-TA) fees – these payments usually compensate a recordkeeper.

Revenue sharing is not disclosed as a hard dollar amount on the ADP fee disclosure. Instead, its buried in the expense ratio of plan funds, making them really easy to overlook. You can find these “hidden” administration fees disclosed as a percentage of assets in the “ADP Investment Fund Expense and Compensation Disclosure” section of their 408(b)(2) fee disclosure document:

ADP 401k Fees_Revenue Sharing

In step 4, you’ll multiply the revenue sharing percentages by the applicable fund balance to calculate the indirect fees charged by ADP.

Step 4 – Calculate Your All-In 401(k) Fee

In this step, we’ll enter the information we found into our spreadsheet to calculate your plan’s total cost – or “all-in” fee (administration fees + investment expenses).

First, enter the fund information from your ADP 408(b)(2) document into the spreadsheet. The formulas will automatically calculate your indirect fees.

ADP 401k Fees_Indirect Fees

Next, we need to calculate your direct fees.

Enter ADP’s monthly fee into the appropriate line item towards the bottom of your spreadsheet. The formula will automatically calculate your annual ADP fee.

ADP 401k Fees_Complete Spreadsheet

At this point, all of your administration fees and investment expenses (net of indirect fees) should be broken out and totaled, giving you the all-in fee of your ADP plan. $6,618.68 for our example .

To make it easier for you to benchmark your fees against other plans, we recommend expressing this number as a % of plan assets. In our example, this number is 1.06% ($6,618.68/ $329,199.49).

Evaluate Your Admin Fees on a Per-Capita Basis

After you have calculated your all-in fee, we recommend you take a quick look at your ADP administration fees on a per-capita (i.e., headcount) basis.

The reason?

Excess administration fees – basically, fees that outstretch your 401(k) provider’s level of service – might not be readily apparent if they’re solely evaluated on an all-in basis with investment expenses. This is especially true if your plan has lots of assets.

To demonstrate the value of this evaluation, consider a $1,625,825.48 401(k) plan with only 7 participants from our 2018 small business 401(k) fee study . While its $25,611.64 all-in fee (1.58% of plan assets) was only a bit above the study’s 1.40% average, its $2,521.81 per capita administration fee ($17,652.64/7 participants) was about six times average!

To calculate your per-capita administration fees, simply divide the administration fee total from your spreadsheet by the number of participants in your plan. For our 23-participant example, this number is $267.56 – which is quite a bit higher than participants could be paying with a low-cost 401(k) provider .

Don’t Let Your ADP 401(k) Fees Get Out of Hand

By now, you should have a complete breakdown of your ADP 401(k) fees and how they’re being charged.

Even if yours are below average now, ADP’s revenue sharing can cause them to very quickly become excessive as assets grow. For this reason, it’s crucial that you compare your plan’s fees on a regular basis.

Too much trouble? We’ve got a solution.

Simply switch to a 401(k) provider that charges fees based on headcount – not assets - to the extent possible. Such a fee structure will make it easier for you to keep your 401(k) fees in check as your plan grows. You just might save some money while you’re at it.

New call-to-action

  • Search Search Please fill out this field.

American Funds

Betterment for business, charles schwab index advantage, edward jones, employee fiduciary, fidelity investments, merrill edge, sharebuilder 401(k), t. rowe price, the bottom line.

  • Retirement Planning

Top 10 Small Business 401(k) Plan Providers

adp 401k plan for small business

Historically, small employers have steered clear of offering 401(k) plans , seeing them as complicated to establish and costly to administer. The rules for running a plan properly are admittedly complex. But increasingly, 401(k) management companies are helping to make the task easier, by providing plans geared to the little guys of the business world.

If you are a small business owner considering initiating a 401(k) plan for your employees (and yourself), here are ten of the top retirement plan providers. They not only offer affordable plans but can act as administrators and investment fiduciaries—relieving you of the headache-inducing homework that comes with any plan.

Key Takeaways

  • Companies large and small that want to offer their employees 401(k) retirement plans have several options these days to easily and efficiently get one up and running.
  • With many providers to choose from, costs have dropped dramatically, along with added services like plan administration and payroll common.
  • Here we list ten of the top 401(k) plan providers that serve small businesses.

ADP's 401(k) plans offer investment options from more than 300 investment managers.   Three investment line-ups are available for participants, based on their familiarity with investing and financial assets.

In addition to retirement plans, ADP specializes in payroll , tax filing, HR , insurance and administrative services. ADP’s small business division (1 to 49 employees) provides integration of payroll and recordkeeping with 401(k) plans, an important benefit for small employers.  

Employees with existing 401(k) accounts have the option to transfer those plans into the new plan, and a mobile app lets employees check their retirement accounts from their smartphones and other devices.

With more than 360,000 retirement plans overall, American Funds provides 401(k) account options that can be tailored to any size company, including startups and those that have recently merged or made acquisitions.  

Their plans include both traditional and Roth versions.   Investment choices can be objective-focused (preservation, balance, and growth) or individual mutual funds. 

A newer player, Betterment for Business started offering its 401(k) plans to smaller businesses in 2016.  

As a robo-adviser , Betterment addresses many of the cost issues associated with the administration and management of a company 401(k) plan by using proprietary algorithms. In addition, Betterment says it eliminates fee hiding by using  exchange traded funds (ETFs). 

Schwab designed its Index Advantage 401(k) plan to “lower costs, simplify investing and help workers better prepare for retirement,” to quote the company literature.   The key is in the title: The plan uses index mutual funds or exchange traded funds (ETFs) with low operating expenses instead of actively managed mutual funds. Schwab claims operating expense savings by as much as 82%.  

Plans have no annual fees and participants get full access to all of Charles Schwab’s brokerage and banking services, including an interest-bearing, FDIC -insured savings account through Schwab Bank.

Automatic enrollment is available and employees can get help or use a self-directed brokerage account .

Edward Jones offers small employers a variety of options when it comes to investments in its 401(k) retirement plans.   They include stocks, bonds, mutual funds, and government securities .

The company offers education and administrative support to both business owners and employees. After the plan is established, employees can review their accounts online or through mobile apps made available by Edward Jones. 

Employee Fiduciary comes out of the gate offering to let business owners compare their current providers’ 401(k) fees to Employee Fiduciary fees. And indeed, Employee Fiduciary has very low fees. It costs just $500 to start a new plan or $1,000 to convert an old one.   Small employers pay $1,500 a year for up to 30 employees plus 0.08% of assets under management .

Employees have access to 377 mutual fund families (including Vanguard), all available ETFs and even a brokerage window through TD Ameritrade .  

Despite its low fees, Employee Fiduciary offers all the services of a full-price provider: tax return forms, annual report summaries, and benefit statements.

Fidelity Investments has consultants to help business owners select a plan and then, once the plan is established, provides access for employees and owners via the internet.   The company also offers a mobile app that allows employees to monitor their individual accounts.

Employees can transfer old retirement accounts into their new 401(k). Fidelity provides integration with payroll services, an advantage for small-business owners, as well as the full roster of services (plan administration, record-keeping, trading, and investment advisory).

Merrill Edge lists streamlining, convenience and affordability as key advantages to its small business 401(k) plan.   Also included are the usual benefits— tax deductions for the employer, investment fiduciary support, and educational support for employees.

With an annual asset-based fee of 0.52%, Merrill boasts pricing that is lower than many competitors.   Its plan includes online account management—a common feature in most 401(k) plans. An automatic enrollment option, as well as a Roth 401(k) option, are also available. Employers have the flexibility to contribute on a year-to-year basis.

ShareBuilder 401(k) has retirement plans specifically designed for small employers. There are four different 401(k) options—individual, simplified, customized, and tiered profit sharing.  

Each plan has distinct matching, vesting , and profit-sharing options and once the plans are established, employees are able to transfer existing retirement accounts into their new 401(k) account. In addition, ShareBuilder retirement plans integrate with the majority of payroll providers. 

Advertising its small business 401(k) plans as appropriate for companies with fewer than 1,000 employees, T. Rowe Price says it offers a “cost-effective structure” for both sponsors and participants.  

Investment options include a range of T. Rowe Price and non-T. Rowe Price investments. There is a plan sponsor resource center as well as 24/7 website access for participants. Sponsors may select from more than 100  no-load mutual funds  and common trusts as well as over 5,400 non-proprietary funds. 

Of course, nothing replaces due diligence and good old-fashioned homework when it comes to checking out various 401(k) plan providers. Make sure you ask enough questions and more important, the right questions when considering a 401(k) plan for yourself and your employees.

ADP. " ADP Advisor Access: Dedicated to Your Success ."

ADP. " Design a Better 401(k) Retirement Plan ."

Capital Group American Funds. " Employers & Plan Sponsors ."

Capital Group American Funds. " 401(k) Retirement Plans ."

Betterment. " Betterment for Business: The Best 401(k) for Employers and Employees ."

Charles Schwab. " Charles Schwab Launches Unique 401(k) Plan Solution Designed to Address Barriers to Retirement Saving and Investing ."

Charles Schwab. " A Unique View on the 401(k) ."

Edward Jones. " 401(k) Plans for Your Employees ."

Employee Fiduciary. " Employee Fiduciary 401(k) Fees are Low and 100% Transparent ."

Employee Fiduciary. " Low Cost 401(k) Investments ."

Fidelity Investments. " 401(k) for Small Businesses ."

Merrill Edge. " Small Business 401(k) ."

Merrill Edge. " How Does Your Plan Compare? "

ShareBuilder 401K. " Simple, Low-Cost Business 401(k) Plans ."

T. Rowe Price. " Small Business 401(k) ."

adp 401k plan for small business

  • Terms of Service
  • Editorial Policy
  • Privacy Policy
  • Your Privacy Choices

By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.

  • Breaking News
  • Sign in / Sign up

ADP, Morningstar Launch Managed Accounts for Small Business 401(k)s

Payroll provider and investment manager cite goal of providing personalized retirement portfolio guidance to underserved small-employer market.

adp 401k plan for small business

ADP Retirement Services and Morningstar Retirement Group announced the offering as a way of providing “personalized retirement investment and savings advice” to employees of all size companies.

ADP is offering its more than 100,000 plan sponsor clients Morningstar’s proprietary managed account service as well as adviser managed accounts that can be managed by third-party advisers; both use Morningstar methodologies to build investment portfolios and suggest savings rates and goals. The service then takes “discretionary authority” to manage the participant’s retirement account going forward. Fees will vary based on whether the plan sponsor elects to use the service as an opt-in or a default/hybrid-default option in their plan, a Morningstar spokesperson wrote via email. 

“Continued inflation and market volatility have made the need to help employees figure out how to maximize and invest their retirement savings greater than ever,” Brock Johnson, president of global retirement and workplace services at Morningstar Investment Management, said in a statement. “This is especially true in the small end of the market, where access to personalized advice within retirement plans is often limited.”

Consultancy Cerulli Associates’ forecasts that the managed account market will grow more than 13% over the next four years to reach $15.6 trillion. Despite growth, the higher-cost of providing managed account services continues to turn off some retirement plan advisers and plan sponsors. In its second quarter earnings report, Morningstar reported its first jump in uptake of workplace solutions managed accounts of 3.8% after showing declines in the prior three quarters.

Morningstar’s adviser managed accounts service allows for third-party registered investment advisers to offer co-branded managed account services to retirement plan clients. The data and investment firm’s flagship managed account services uses its proprietary portfolios and methodologies. In addition, ADP will make the adviser managed accounts service available to two retirement-focused RIA firms, with plans to add more.

“We think every retirement plan, no matter the size, should have access to personalized advice at scale,” Chris Magno, SVP and general manager of ADP Retirement Services, said in a statement.

ADP and Morningstar join other small plan providers that have partnered on managed account offerings. Plan provider Ascensus partnered with Franklin Templeton on an offering in 2022 , and Vestwell partnered with Franklin Templeton on an adviser managed account offering in 2021 .

ADP is the second largest 401(k) recordkeeper for plans of under $10 million as of the end of 2022, second to Paychex Inc., according to the latest data from PLANSPONSOR, which is a sister publication of PLANADVISER.

IRS Part-Time Eligibility Rules Bring Relief, Surprise, Deadline Concern

Hub lands afs 401(k) retirement and wealth advisories, wilshire: personalized investing is future of dc plans, tyson foods employees allege excessive 401(k) plan fees, retirement industry people moves - 12/1/23.

« American Airlines ESG Lawsuit May Move Ahead, According to Court Filing

adp 401k plan for small business

  • HR + Payroll Software

Talent Acquisition

  • Talent Management
  • Workforce Management

Benefits Administration

Payroll Software

Hr software, expense management software, recruiting software, automated talent sourcing, onboarding software, talent development, career management software, learning management system, pulse surveys, compensation planning, time + attendance software, scheduling software, benefits advisor, aca reporting software, workers’ compensation, compliance overview, payroll / business tax credits, workforce benefits, regulatory compliance, data & security.

adp 401k plan for small business

Transform Frontline Managers Into Effective Leaders

adp 401k plan for small business

Simplify Compliance Management With Paycor

  • By Industry

Professional Services

Manufacturing, restaurants, 1-49 employees, 50-1000 employees, 1000+ employees, transform frontline managers into effective leaders.

  • Product Technology Partners
  • Retirement Services
  • Franchisor Opportunities
  • Private Equity

Guides + White Papers

  • Case Studies
  • HR Glossary

adp 401k plan for small business


  • News + Press
  • Sponsorships
  • Plans + Pricing
  • Take a guided Tour
  • Watch a Demo
  • Solution Finder

Call Us Today:

adp 401k plan for small business

Exclusive Access to Select Products

  • HR + Payroll Software Payroll Software HR Software Analytics Expense Management Software
  • Talent Acquisition Recruiting Software Automated Talent Sourcing Onboarding Software
  • Talent Management Talent Development Career Management Software Learning Management System Pulse Surveys Compensation Planning
  • Workforce Management Time + Attendance Software Scheduling Software
  • Benefits Administration Benefits Advisor ACA Reporting Software Workers’ Compensation
  • By Industry Healthcare Professional Services Manufacturing Nonprofits Restaurants Education Retail Technology
  • By Role Finance HR Payroll
  • By Size 1-49 Employees 50-1000 Employees 1000+ Employees
  • Call Us Today: 855-752-8564

401(k) for Small Business Owners: The Comprehensive Guide

Last Updated: October 13, 2023 | Read Time: 14 min

One-Minute Takeaway

  • A 401(k) plan offers employees a tax-advantaged way to save for retirement, often with employer matching contributions.
  • Small business owners can elect to self-administer or use a financial adviser to manage their 401(k) plan.
  • Self-administration involves a lot of record-keeping and compliance management.

As a small business owner, you have your hands full, juggling roles that range from daily operations manager to long-term strategy architect. But have you ever considered adding the role of “Retirement Benefits Planner” to your list? Offering a 401(k) plan not only provides your employees with a way to save for retirement but also helps you enhance your business’s competitiveness and employee retention. This comprehensive guide aims to unpack everything you need to know about administering a small business 401(k) plan.

What Is a Small Business 401(k) Plan and Why Should You Offer One?

A 401(k) is an employer-sponsored retirement savings plan that enables your employees to set aside a portion of their pre-tax earnings for retirement. You, as the employer, can match these contributions, boosting the size of your employees’ retirement savings.

  • Tax Benefits for Small Business Owners . Not only are the contributions you make to your employees’ accounts tax-deductible, but you may also be eligible for a tax credit for the costs to set up and administer the plan. New tax incentives have made it even more financially advantageous for small businesses to set up 401(k) plans.
  • Employee Retention and Competitive Compensation . In today’s competitive labor market, offering a robust 401(k) plan can set you apart, making your business a magnet for high-quality candidates. Studies have shown that retirement benefits are among the top considerations for job seekers.
  • Personal Savings for Business Owners . It’s easy to overlook your own retirement while handling the day-to-day challenges of running a business. A 401(k) plan enables you to invest in your future by making contributions that are tax-deferred until withdrawal, building your own nest egg.
  • Tax Benefits for Employees. Employees gain the ability to save for retirement in a tax-efficient manner. Pre-tax deductions reduce their current taxable income. An employer match serves as an additional financial incentive for employee participation. Offering a retirement plan can also improve financial wellness across the company, which is known to reduce stress and increase productivity.

Setting up a 401(k) for Small Business: Step-By-Step

Choosing the right 401(k) plan requires thorough analysis and expert guidance. A certified financial advisor can evaluate your business’s financial health, provide tailored advice, and help you navigate the complex landscape of 401(k) plans. In a nutshell, we’ll cover the main points you’ll need to consider if you want to self-manage your plan.

Determine Which 401(k) Plan You Want to Offer

Understanding the distinct types of 401(k) plans is crucial for selecting the one that’s the perfect fit for your business.

  • Traditional 401(k) : This option offers high contribution limits and flexible employer contributions but requires annual testing to ensure compliance.
  • Safe Harbor 401(k) : This is an excellent choice for small businesses looking for a plan that’s easier to manage in terms of compliance. Mandatory employer contributions may be a drawback for you, but it can help you attract and retain employees.
  • SIMPLE 401(k) : Specifically designed for small businesses with fewer than 100 employees, this plan type has lower contribution limits but also fewer administrative burdens.

Plan Administration

Administering a 401(k) plan involves several tasks, from ensuring compliance with federal regulations to educating employees about their investment options. Hiring a plan administrator instead of self-managing your plan is often an excellent investment.

  • Self-Administration:  If you opt to administer the plan yourself, you’ll be responsible for record-keeping, compliance with federal regulations, employee education, and ensuring timely contributions and distributions.
  • Outsourcing:  Contracting a specialized plan administrator can lift the burden of these duties, allowing you to focus on running your business.

Whether you self-administer or outsource, remember that you hold a fiduciary responsibility to act in the best interests of your employees by ensuring the plan’s effective management.

The Nuts and Bolts of Self-Administering a 401(k) Plan

If you opt to self-administer your small business 401(k) plan, the responsibility for compliance, record-keeping, and a slew of other administrative tasks falls squarely on your shoulders. This route can be cost-effective but also incredibly labor-intensive, with a range of compliance intricacies. Below is a deeper dive into what you need to know.

  • Record-Keeping. One of your key responsibilities as a self-administering employer is to maintain accurate records. This includes tracking employee contributions, employer matches, investment gains or losses, and distributions. Failure to maintain these records can result in severe penalties from the IRS and the Department of Labor (DOL).
  • Employee Notifications and Education. Federal law mandates that you furnish employees with certain disclosures:
  • Summary Plan Description (SPD):  This document outlines the benefits, rights, and obligations of participants in simple language.
  • Summary Annual Report (SAR):  A yearly financial summary of the 401(k) plan.
  • Individual Benefit Statements: Quarterly or annual statements that detail the individual employee’s account activity.

Additionally, consider organizing informational sessions to help employees understand the nuances of their 401(k) investment choices and how to make changes to their contributions.

  • Timely Contributions. The law stipulates that you must deposit employee contributions “as soon as they can be segregated from the employer’s assets, but no later than the 15 th business day of the month following the payday.” Delayed deposits can result in penalties.
  • Regular Testing. Certain compliance tests ensure that the benefits of your 401(k) plan are not disproportionately skewed towards higher-income employees:
  • ADP and ACP Tests:  Actual Deferral Percentage (ADP) and Actual Contribution Percentage (ACP) tests measure the fairness of deferrals and contributions among different groups of employees.
  • Top-Heavy Test:  This test evaluates if key employees own more than 60% of plan assets.

If your plan fails these tests, you’ll need to take corrective actions like refunding excess contributions to higher-earning employees or making additional contributions for lower-earning employees.

Compliance Watch-Outs

As with most things HR and payroll, you’ll need to keep a close eye on a few things:

  • Non-Discrimination Rules. As we mentioned previously, you need to be aware of the regulations that ensure your 401(k) plan does not discriminate in favor of highly compensated employees or owners.
  • Investment Oversight. You’re responsible for the selection and monitoring of investment options. Poor choices or excessive fees can lead to legal consequences under your fiduciary duties.
  • Form 5500. You’ll need to file Form 5500 every year to report financial conditions, investments, and operations. Failure to file or late filing can result in steep fines from both the IRS and DOL.
  • Fiduciary Responsibilities. The Employee Retirement Income Security Act (ERISA) imposes fiduciary duties on plan administrators. You must act solely in the interest of the plan participants and their beneficiaries. Failing to do so can open the door to lawsuits and regulatory actions.
  • Required Minimum Distributions (RMDs). As plan administrator, you’re responsible for initiating required minimum distributions for all 401(k) account holders starting at age 72. Failing to do this can result in a tax penalty of 50% of the amount not distributed as required.
  • Plan Audits. If your plan has 100 or more participants, an annual audit by a qualified independent accountant is generally required. Failing to meet audit requirements can lead to plan disqualification.

By giving due attention to these factors, self-administering a 401(k) can be a rewarding endeavor that adds substantial value to both your business and your employees. However, given the complexities and risks involved, you may want to consult regularly with a tax advisor or a certified financial planner specialized in retirement benefits.

Contribution Limits and Rules

Employee Contributions

  • Annual Contribution Limits : The annual limit is subject to periodic updates by the IRS. For 2023, the limit is $22,500 or $30,000 if the employee is 50 or older.
  • Catch-Up Contributions : Employees over 50 can make additional contributions, which for 2023 is set at $7,500.

Employer Contributions

  • Annual Employer Match Limits : Total combined 401(k) plan contributions by the employee and employer can’t exceed $66,000 ($73,500 for employees who are 50 or older). Total contributions can’t exceed 100% of an employee’s annual compensation.

Employer Matching and Vesting

Employer matching is highly flexible. You can set a flat rate or tier it based on employee salary or years of service. The key is to find a balance that motivates employee participation without straining your finances.

There are generally two types of vesting schedules:

  • Cliff Vesting : Employees become fully vested after a specific number of months or years.
  • Graded Vesting : Employees gradually become vested over time.

Investment Options

A well-structured 401(k) plan offers a range of investment options to suit different risk profiles and financial goals. The most common are mutual funds, although plans can offer everything from individual stocks and bonds, to target date funds, to real estate investment trusts (REITs).

Costs of Administration

The costs of 401(k) plan administration can vary widely depending on the plan type, the provider, and the range of services offered. While some plans charge a flat fee, others may charge a percentage of plan assets.

  • Setup Fees : Initial costs can range from $1,000 to $5,000.
  • Ongoing Fees : Expect to pay around 0.5% to 2% of the total plan assets annually.

Disclosing to Employees

It’s essential to educate your employees about their new retirement plan. Workshops, webinars, and one-on-one meetings are useful methods to communicate the ins and outs of their 401(k) options.

Implementing a 401(k) for small business is a win-win. It enables you to offer competitive compensation and flexible work arrangements, while also setting both you and your employees on a path towards financial security in retirement. With careful planning and ongoing administration, a 401(k) can be more than just an employee benefit; it can be a cornerstone of your business’s long-term success.

How Paycor Helps

Secure your employees’ futures with a tailored small business 401(k) plan , while ensuring their well-being. Paycor’s benefits solutions makes the process more manageable by reducing administrative work and mitigating compliance risk.

Resource Center Banner Benefit Admin with Laptop

Related Resources

Read Time: 12 min

Final Paycheck Laws by State 2024

When it comes to issuing a final paycheck, employer responsibilities differ from state to state. See the overview of final paycheck laws here.

Read Time: 16 min

How to Calculate Imputed Income for Domestic Partner Benefits

Learn how to provide benefits to your employees’ domestic partners without breaking the law. This guide explains what imputed income is and how to calculate it correctly.

Read Time: 10 min

A Guide to Remote Hiring

Learn how to hire remote workers effectively with these best practices and tips. Ensure your pipeline stays healthy for your remote and hybrid work environment.


  1. You And ADP 401k

    adp 401k plan for small business

  2. Event Report

    adp 401k plan for small business

  3. How to Find & Calculate ADP 401(k) Fees

    adp 401k plan for small business

  4. How To Set Up A 401k Plan For Your Small Business Employees

    adp 401k plan for small business

  5. ADP 401k plan . I met a prospect that told me he is not happy about the plan he set last year

    adp 401k plan for small business

  6. What should I do with my former employer 401(k) plan?

    adp 401k plan for small business


  1. ADP numbers sent 'shock and awe' through stocks, says Annex Wealth's Brian Jacobsen


  3. The 401k Rollover HACK for Business Startups (ROBS)

  4. Plan Design Features to Consider for 2024!

  5. Self-Employed Retirement Plan Options

  6. SEP IRA


  1. Does GE Match Contributions to an Employee’s 401k Plan?

    General Electric provides a 50 percent match on employee 401k contributions on up to 8 percent of their pay. This matching benefit vests immediately and employees can enroll in the plan as soon as they are hired.

  2. Understanding 401k Withdrawal Rules

    For years you diligently contributed to your 401K retirement plan. But now, you’re coming closer to the time when you need to consider your 401K’s withdrawal rules. There are also changes to the 401K hardship withdrawal rules you should kno...

  3. What Is ADP Workforce Now?

    ADP Workforce Now is a human capital management program that is designed for businesses that employ 50 or more employees. Businesses can use the program for a variety of purposes, including payroll management, human resources management, ta...

  4. 401(K) for Small Business

    Monthly Investment Service Fee: ADP Strategic Plan Services, LLC will impose a fee of .10% of covered assets, subject to a minimum fee of $20.83

  5. 401(k) for Small Business Owners

    Charge reasonable plan and investment fees and have no hidden costs · Provide real-time integration between the 401(k) recordkeeping and payroll systems to

  6. ADP 401k Review and Pricing in 2023

    ADP Retirement Services offers Roth 401(k), safe harbor 401(k), SIMPLE IRA and SEP IRA plans to businesses of all sizes. It integrates with the company's

  7. ADP Employee Retirement Review 2023

    401(k): ADP offers a 401(k) plan wherein plan administrators must select and monitor investment options and handle compliance-related issues.

  8. How to Find & Calculate ADP 401(k) Fees

    In our most recent Small Business 401(k) Fee Study, we found that ADP plans cost small businesses an average of 1.47% of plan assets each year

  9. Top 10 Small Business 401(k) Plan Providers

    These 10 401(k) plan management companies and plan providers can make it easy for small businesses to offer retirement plans for their employees.

  10. ADP, Morningstar Launch Managed Accounts for Small Business

    ADP is the second largest 401(k) recordkeeper for plans of under $10 million as of the end of 2022, second to Paychex Inc., according to the

  11. Stay away from ADP for small business 401K plan administration

    If you are looking to ADP to run your 401K plan my advice to you is to RUN as fast as you can away. They are quite simply HORRIBLE.

  12. ADP 401k Essential

    ADP 401k Essential is a new retirement plan solution designed specifically for small businesses. This feature-rich retirement product is

  13. How much does a 401(k) cost small business employers?

    Startup costs. Employer contributions, such as a match or profit-sharing (optional). Plan administration fees & expenses. Below

  14. 401(k) for Small Business Owners: The Comprehensive Guide

    Certain compliance tests ensure that the benefits of your 401(k) plan are not disproportionately skewed towards higher-income employees: ADP and