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How Small Businesses Can Save on 401(k) Fees Thumbnail

How Small Businesses Can Save on 401(k) Fees


I am no longer accepting the things I cannot change. I am changing the things I cannot accept.

Small businesses are suffering. The pandemic has tested the backbone of America, but it has not shaken its resolve. I am here to help the small businesses that make this country great. While I can’t reach everyone, my goal is to take action and relieve some of the stress on small business owners and employees. 

If you own a small business or are an employee of a small business keep reading. If you work for a large company you can stop here or forward this to someone you know who does.

Who am I going to help?  99.9% of all businesses in the United States are small businesses. Approximately 60 million people work for small businesses. Massive action needs to be taken to help this large portion of Americans. 

Why am I doing this? 401(k) fees can eat away at the account balances of hard-working people. When 401(k) fees are paid from plan assets, they reduce the investment returns of plan participants dollar-for-dollar. Over time, these losses can add up to hundreds of thousands of dollars when missed compound interest is considered. We owe it to those 60 million people to do better.

What am I talking about? Because of the erosive effect of 401(k) fees, business owners have a fiduciary responsibility to pay only "reasonable" fees from plan assets. If you're a small business owner, you must "benchmark" your 401(k) fees to prove they are reasonable. This process usually involves comparing your 401(k) provider's administration and investment fees to competing providers or industry averages on an apples-to-apples basis.

When am I going to do this? RIGHT NOW! Now through the end of 2021, I am going to be helping people compare their 401(k) fees to prove if they are reasonable or not. I’ll compare your “all-in” fee (administration and investment fees), including and hidden fees charged to your 401(k). 

Where do you get this information? There are two places where you can look up fees on your plan. The Department of Labor EFAST website will help you locate your form 5500 filing or your 408b-2 fee disclosure document. 

How am I doing this? Sheer will, determination, and passion have led me to find ways to lower plan costs by as much as 80% against providers such as ADP, American Funds, Ameritas, Ascensus, CUNA, Empower, Fidelity, John Hancock, Mass Mutual, Nationwide, OneAmerica, Paychex, Principal, Transamerica, Vanguard, Voya, and Wells Fargo. Our costs are different because they are not based on plan assets for administrative and investment work, but rather a per participant fee. One plan with 36 employees saved 79.01% in Custodian, Recordkeeper, and Third-Party Administration fees. That was a savings of $65,672 in the first year alone.

Most importantly, we advise on 401(k) plan set-up, administration, and services including:

  • Plan Administration & Recordkeeping

  • Investment Management

  • Compliance & Reporting

  • Payroll Automation

  • Education & Support

Need additional help? The SECURE Act permits an eligible small business to claim a tax credit for adopting a new 401(k) plan and/or a new automatic enrollment feature.

  • Qualified startup costs - Before the SECURE Act, a small business could claim a tax credit equal to 50% of their “qualified startup costs,” up to a $500 limit. Now, the limit is the greater of (1) $500 or (2) the lesser of (a) $250 multiplied by the number of non-Highly Compensated Employees (non-HCEs) eligible for plan participation or (b) $5,000. This credit is available for up to three years.

  • Automatic enrollment - Small businesses can earn an additional $500 tax credit by adding an automatic enrollment feature to a new or existing 401(k) plan. The credit is available for each of the first three years the feature is effective.

  • When combined, these credits can total up to $5,500 per year ($16,500 for 3 years).

Whether you are an owner or an employee, wouldn’t you like to know how much you could be saving? I typically serve small companies that have between 1-100 employees. We are a Fee-Only, Fiduciary, and Fully Independent Financial Planning firm without judgment. To learn more email Service@mygatewaymoney.com.

*Savings were based upon a 36 employee plan with $7.9 mil in assets for Custodian, Record Keeper, and TPA fees.
**Fund Expenses include the fund’s expense ratio plus and “wrap” fee charged by the provider. The provider % includes revenue sharing paid to the provider by the investment fund or “wrap” fees. Contact us for details.

Gateway Financial, LLC is registered as an Investment Adviser with the State of Ohio and in other jurisdictions where exempted. Registration of an Investment Adviser does not imply any level of skill or training.