401(k) plan without fees

A: No, all 401(k) plans incur some type of expense for required services like a bonded trustee (usually a bank or investment company) to handle certain functions. None of the financial srvice firms offer their services for free, although some build the charges into the investment accounts instead to reduce or eliminate charges that the business pays. Still, in one way or another, you are paying for that service.

A number of all-inclusive services are available the provide small business 401(k) plans at minimal price (usually about $500 per year).

As an alternative, consider that a number of laws have changed over the past few years that collectively make old-fashioned Individual Retirement Accounts the obvious vehicle of choice for small businesses to set up a retirement savings plan. As an employee, you probably will not notice the difference between one of these new IRA-based retirement plans and the 401(k) plan that your company would otherwise use. The features are similar but the costs, liability and paperwork are much lower for the business. The business is not limited by the $3000 contribution limits that usually apply to individual IRA owners. Businesses can contribute almost any amount desired as long as the business retirement plan is set up for that purpose. Although plan loans are restricted, your funds are still available without penalty for first time home purchase and medical expenses. Unlike 401(k) plans, there are little if any administrative costs, although we recommend an annual review of all financial arrangements. This option allows the employer to set a default account while permitting employees to select and manage their own IRA account anywhere they wish. A free CD from the IRS is available to further explain the options available. Individual assistance to set up and manage an account is available in request.

We should add that in financial services, like most other things, the least expensive option is seldom the most satisfying nor the best value for your budget.