When Bianca Caampued and Mallory Blair opened Small Girls PR in 2010, a retirement plan was the last thing on their minds. They wanted to grow a business, not contemplate the end of anyone's career. And so they did: Five years later, Small Girls had an impressive client list, hip offices in Brooklyn's Williamsburg neighborhood, almost 20 employees -- and job recruits who were asking about the 401(k) on offer.

There wasn't one. So Kara Silverman, Small Girls director of operations, started investigating options. But, she says, "I'd never been in the position of evaluating 401(k) plans before."

That probably sounds familiar. When you're starting a business, it may be years before you can hire even one dedicated human resources employee, never mind a retirement-plan specialist. And if you're figuring out a 401(k) offering on your own, it's hard to know where to start. You can't automatically rely on retirement-plan sales­people, who may hide their products' less savory financial details in the fine print. And since you're acting as a fiduciary for your employees, you could get into trouble if you saddle them with an expensive plan. While "GE has a whole division dedicated to its 401(k) plan," few small businesses can afford anything similar, says Brooks Herman, head of data and research for BrightScope, which rates 401(k) plans. So, first of all...

Look Beyond the Easy Options

If you're a smaller employer, you're probably going to have to search harder for affordable retirement-plan options. They do exist -- as do the resources to help you find them. Index funds tend to be the cheapest and best investment for many employees' long-term retirement plans -- though salespeople may try to push more expensive, actively managed funds. Or they may emphasize the bells and whistles rather than the underlying product.

Silverman, for example, was inundated with information about the account-monitoring technology offered by the different plan providers, meaning the financial companies that manage 401(k)s and provide record-keeping services for them. She can rattle off the different types of asset classes they offered for Small Girls employees to invest in, and she was wooed by bonus offers. One plan provider, for example, offered a cake to employers who sign up for its 401(k) services.


Big companies can have entire divisions devoted to figuring out retirement plans. You might not have even one person.


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But when asked if her retirement suitors were suggesting managed funds or less expensive index funds, Silverman didn't know. "I wondered if some of those details would come out when we signed on the dotted line," she says. That's a common refrain, but it's far too late in the process -- waiting until you sign can cost you, and your employees, money. While those working for large corporations often pay annual fees of less than 0.5 percent of the funds invested in their employee retirement plans, small-business participants can lose up to 2 percent, or even more, to expenses each year, according to BrightScope.

Retirement plans containing less than $10 million in assets are not as likely as bigger plans to offer their participants access to the cheaper, passively managed index funds, according to a 2014 study by the Investment Company Institute and BrightScope. As founder and president of advisory service PlanVision Mark Zoril warns, "The employers don't know what they don't know."

Flat Fees Are a No-Brainer

Some providers will try to lure you by charging a low upfront fee, with an agreement to let them take a percentage of assets under management, usually 1 to 2 percent, according to Zoril. That can seem like a good deal -- but it's not.

Zoril points to one company that recently switched retirement-plan providers. The original plan had about $7 million in assets, for which the company was paying about 1.5 percent annually, or about $105,000, to its service provider. Zoril helped the company switch to a lower-cost plan provider that offered passively managed index funds. The new annual charge was $28,000 -- most of which was a flat fee, rather than a percentage that ballooned as employees' savings increased.

As for Small Girls' Silverman, she ultimately picked the company with the free cake, newcomer ForUsAll. It also offers low-cost index funds, keeps employee costs at about 0.5 percent, and charges employers a monthly flat fee. Not a bad deal at all.

The Grim Statistics

Act now to beat the retirement odds.

31% of small businesses with 26 to 100 employees offer a retirement plan.
Source: GAO

5% of very small businesses, with 1 to 4 employees, offer a retirement plan.
Source: GAO

60% of employers with 50 or fewer employees say they'd support a government-sponsored 401(k), according to a Connecticut survey.
Source: AARP

$2,500 is the retirement savings of the average household.
Source: National Institute on Retirement Security, 2015

25X projected expenses of the first year of retirement is the recommended amount an individual should have saved before retiring.
Source: Charles Schwab

The 401(k) Experts

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Ready to roll out this benefit? These resources can help you figure out exactly what retirement plans to offer workers.

The Cost Cutter
Advisory services such as Plan­Vision help companies evaluate their current retirement plans, pinpoint ways to save money, and assist in looking at proposals from retirement-plan providers.

The Grading System
Six-year-old startup BrightScope evaluates 401(k) plans using publicly available data. On its site, you can learn about best practices and how similar-size plans compare.

The Giants
The country's largest traditional 401(k) providers, including Fidelity Investments and Vanguard Funds, offer low-cost options and some products specifically tailored for small businesses.

The Independents
Employee Fiduciary is a low-cost and admirably transparent plan provider that publishes fees for its services on its website. For your employees, meanwhile, investing startup Personal Capital has an online tool that allows individuals to check the fees on their 401(k)s.