Lynda it has been stated a few times here, there are many options for a Plan Sponsor to consider when deciding which plan best fits their population. Cost, Investments, Education are just a few. May I suggest working with and Independent Consultant to help you analyze which scenario best suits your particular needs. This way you get a completely unbiased view of all the moving parts of the Retirement plan.
Lynda, Excellent answers on the choice of plan types. If you decide to go with a 401(k) because of its advantages, there are some very good choices out there nowadays. Employee Fiduciary has an open platform and a low R/K fee of $1300 per year. Sharebuilder and Intuit 401k also offer competitive pricing for startup plans, although their investment platforms are not as open. T. Rowe Price has an excellent platform that tends to be most cost effectively for plans that already have an average balance per employee approaching $50K. Vanguard has an excellent platform, but my analysis suggests it isn't competitive for startup plans due to its $3500 base R/K fee (its small business plans are actually in partnership with Ascensus for R/K and this adds a layer of cost).
Bottom line: there are very good 401k options these days and if you can see your retirement plan growing to $200K or more fairly quickly, then the 401k option will likely be superior to a SIMPLE in a lot of ways.
The answer is it depends. The Simple Plan is likely the most popular but which plan you choose is going to depend upon your goals and what is cost effective. There are many things to consider. What are you trying to accompllish with a qualified plan? Are you trying to maximize tax benefits to the owners of the business? Are you trying to retain or reward key employees? How important is it to keep the cost to a minimum? How should an employee have to wait until they are able to participate?
Answers to questions like these will begin to steer you in the right direction. Talk to two or three different advisors and see what they recommend. Coordinate with your CPA or tax advisor and see if the plan makes sense to everyone before making a decision. You will want to look at Publication 560: http://www.irs.gov/pub/irs-pdf/p560.pdf Hope that helps.
There are a number of firms that can help you establish a low-cost, high quality 401k plan for your small business. My firm has a partnership with a wholesale provider to offer customized 401k plans to start-ups and small businesses (fewer than 50 employees), bundling a number of service providers and investment options (mutual funds) that we have selected with an eye towards value. We eat our own cooking too; our own company 401k plan uses the same vendors.
There are a number of firms that we compete with in this same segment, including Loring Ward, Vanguard (they have recently re-introduced a program for small businesses) and a number of mutual fund firms who also have 401k initiatives.
I recommend that you request a proposal from two or three firms that focus on small business plans. Some issues you will want to consider are:
(1) Type and range of investment options: how are investments selected? (2) Education offered by the plan administrator and/or advisor; (3) Fixed and variable costs of the plan; (4) Flexibility of the plan (Roth option, loan option, brokerage option); (5) Quality of online reporting platform; (6) Awareness of and compliance with new fiduciary guidelines; (7) Service and support; (8) Ability and willingness of the investment advisor to provide addition advice and services to your employees.
Do not hesitate to ask tough questions of your prospective partners. While the benefits can be significant both for the plan sponsor (your company) and the plan participants (you and your employees), considerable time and some expense will be required to understand and evaluate your options. Feel free to post any further questions or comments.
Something that bears emphasis is that the coming changes to the 401k marketplace will probably broaden your access to unbundled retirement plans versus many that wrap everything into one and make cost comparison difficult. It would be a good thought to ask your advisors how they approach these coming changes so that you are in the best position possible versus ending up with a plan that leaves you with a lot of work in a very short period of time.
As stated by a number of the respondents, it completely depends. The ‘top 401k plan’ for you is the one that meets and/or exceeds all the requirements and goals that you have set as a top priority for your small business of 10 employees or less. Demographics of the owner(s) and employees, most importantly their age, income level, and years of service, are key factors of course. Consult with an independent financial consultant and maybe even an actuary with expertise and strong experience in the retirement planning arena. They can do the proper analysis and help you to select not necessarily just the ‘cheapest plan,’ but the most effective for you and your company for all of the reasons most important to you.
The lower the cost the better. Depending on several elements, a defined comp plan is best for professional offices like Doctors and Attorneys where there is a wide income disparity. I could go on and on, but it would end up being just words until I knew the variables. I'd be happy to talk to you until you find an Advisor. Click on my name, and it will lead you to my page and website.