Understanding your plan

When considering qualified plans for small employers, the three most common options are SIMPLE IRAs, 401(k)s, and profit-sharing plans. SIMPLE IRAs have no administrative expenses but come with some restrictions. 401(k)s and profitsharing plans both have a one-time startup fee for designing documents, creating a summary plan description, and setting up the plan, which typically ranges from $500 to $1,500.

Most plans also have an annual document maintenance fee of between $200 and $500, depending on the type of plan and the number of employees. These fees cover a range of services, including testing, preparation of the 5500 form, and technical services like daily participant valuation.

These services are provided by a third-party administrator (TPA), who works closely with the employer to ensure proper testing. The TPA may be part of the provider or an independent company. It is essential to understand their role in a successful plan.