Debunking 401(k) Myths: What Small Business Owners Need to Know

Posted on Aug 18, 2025

Many small business owners hesitate to offer employees a 401(k) plan, believing it’s something only large companies can afford or manage. Unfortunately, these misconceptions can cause them to miss out on powerful benefits for both themselves and their staff. Let’s clear up a few common myths:

Myth #1: “It’s too expensive.”

While there are costs associated with setting up and maintaining a 401(k), they are often significantly lower than owners expect. Startup tax credits can offset much of the expense, sometimes covering up to 100% of administrative costs for the first few years. In addition, competitive provider options mean you can choose a plan that fits your budget.

Myth #2: “I don’t have enough employees.”

A 401(k) plan can be valuable whether you have two employees or 200. In fact, one-participant 401(k) plans (also called Solo 401(k)s) are specifically designed for businesses with no employees other than the owner and spouse, offering high contribution limits and tax advantages.

Myth #3: “It’s too complicated.”

The rules for 401(k) plans can be complex, but you don’t have to manage them alone. This is where a Third Party Administrator (TPA) comes in. A TPA handles plan design, compliance testing, recordkeeping, and filing requirements—freeing you to focus on running your business. They ensure your plan meets IRS and Department of Labor requirements and help you avoid costly mistakes.

The Bottom Line

A well-structured 401(k) plan can help you attract and retain top talent, save significantly for your own retirement, and reduce your taxable income. With the right TPA guiding you through the process, offering a plan is simpler, more affordable, and more flexible than many business owners realize. Your future—and your employees’—could be brighter than you think.

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.