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10 things

Feb. 23, 2013, 7:01 a.m. EST

10 things 401(k) plans won’t tell you

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By Elizabeth O'Brien

Continued from page 8

9. Small business employees are missing out.

Just half of workers in companies with fewer than 100 employees have access to retirement accounts, according to the Bureau of Labor Statistics, compared with 79% of workers in companies with up to 499 workers, and 86% of workers in large companies. “They’re still not reaching enough workers,” says Chad Parks, founder and CEO of The Online 401(k), a provider of 401(k) solutions for small businesses.

When they do have 401(k)s, small company employees are likely to pay more for them than their counterparts at big firms, for a number of reasons. Some can be legit: many advisers who consult on 401(k)s get paid a percentage of the plan’s assets, and they need to charge a larger percentage for a plan with fewer assets. And with a small plan, the administrative costs are spread out among fewer people. But this is sometimes taken too far, Parks charges. Some small businesses pay as much as 2.5% for a basic 401(k), he notes. Another reason why small businesses get stuck with a bigger bill is because they often don’t have investment committees who scrutinize the plan on behalf of their fellow employees.

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