Flat-fee 401(k)s could help small businesses build competitive retirement packages

• Key Insight: Learn how flat-fee 401(k) models can unlock retirement offerings for small employers.
• What's at Stake: Small employers risk talent loss and regulatory gaps by failing to modernize retirement benefits.
• Supporting Data: Only 38% of small businesses offered retirement plans, per a 2024 EBRI study.
• Source: Bullets generated by AI with editorial review

Having a small business doesn't have to mean sacrificing the ability to offer workforces a complete retirement package.   

According to a 2024 study by the Employee Benefit Research Institute, only 38% of small businesses offered retirement plans, with many of the organizations choosing to opt out due to cost, complexity and lack of awareness around the rules, options and benefits. Investing in unconventional retirement strategies like a flat-fee 401(k), which offers fixed prices for employees and employers, could be the key to diversifying their benefit offerings. 

"Retirement is a complex industry and it has been for a while," says Hunter Claxton, SVP of strategy at Ubiquity, an online retirement benefit provider for small businesses. "But now there's a lot more players in the space and a lot more opportunity to get even the smallest of businesses saving for retirement." 

Read more: The retirement readiness gap: Why benefit managers must act

For years, large businesses have been relying on the traditional 401(k) model, which charges its service and administration fees depending on the amount of money their workforce has accumulated. Those fees are often deducted directly from employees' retirement accounts, and will rise as employees' contributions grow. However, large organizations have the means to absorb much of the administrative costs, leaving employees with just the investment fees, which are still typically lower than the employee could find outside of their retirement plan.  

However, that model isn't necessarily optimal for small businesses operating under smaller budgets and serving a workforce that may not have the bandwidth to adjust to fluctuating fees being taken out of their accounts. Instead, a flat-fee 401(k) has a set amount for both employees and employers to pay each month or year, no matter how much employees have saved. For employees, it means the ability to consistently grow their retirement savings, while giving business owners financial stability.

"[A flat-fee model is] very predictable for the business owner to budget for and to understand," Claxton says. "It also gives them more money to invest back into their passion, which is growing their small business." 

The time for new retirement strategies is now

Determining when to put a new retirement benefit in place is the first step for any small business, and according to Claxton, the fall is the perfect time to start. That's when many businesses are budgeting for 2026 and when most other organizations are preparing for or entering open enrollment. Claxton urges leaders to reach out to providers specialized in retirement benefits for small businesses that can help them navigate the differences and have introductory conversations as soon as possible, especially as employee demand for better, more comprehensive benefits is at an all-time high.   

Read more: New report reveals employees are underprepared for retirement and healthcare costs

"We all know that employees and people looking for employment are certainly scrutinizing benefits," Claxton says. "For employees, paying a set amount month in and month out can be important to finding the confidence [they want] in retirement."

Ubiquity has been offering flat-fee 401(k)s to its smaller clients for over twenty years, and the feedback has been overwhelmingly positive, according to Claxton. Organizations who previously believed they wouldn't be able to help their workforce save for the future are now able to provide reliable, sustainable support.   

"Small business leaders shouldn't have to go through any fine print or get into the weeds about what it may cost now versus what it's going to cost 10 years from now," Claxton says. "A flat-fee model is a simpler, easier approach to retirement."