A 403(b) plan is a tax-deferred retirement plan offered by certain tax-exempt organizations and public schools. Employees save for retirement in a 403(b) plan by contributing to individual accounts, and employers may choose to contribute to employee accounts.
When considering the best 403(b) company, certain 501(c)(3) tax-exempt organizations and public schools will look for providers with the widest array of cost-effective investment options, best customer service, and additional services to help employers and participants.
Here are the six best 403(b) companies:
- Vanguard: Best overall for low-cost 403(b) plan with access to a wide range of mutual funds
- Fidelity: Best for employees wanting in-person guidance on 403(b) plans
- T. Rowe Price: Best for providing participants with high-quality market research
- Human Interest: Best for streamlined process, which saves on administrative costs
- American Funds: Best for clients who want advisers to walk them through the process and manage mutual funds on their behalf
- Aspire: Best for real-time access to plan details through open-architecture platform
Best 403(b) Companies at a Glance
Provider | Online Only | Setup Fees* | Annual Fund Fee/Other Fees | Admin/Recordkeeping Fees |
|---|---|---|---|---|
| Yes | Varies | 0.12% average per fund; $50 upfront + $25 annual lending fee | $5 per month, per employee |
| No | Varies | $24 per year, per custodian; 0.05% to 1.25% mutual fund expense ratios | Varies per plan size |
| Yes | Varies | 0.45% to 4.5% mutual fund expense ratios | $20 per year, per participant |
| Yes | Varies | Employee: 0.50% of balance + 0.07% average fund fees | $120 per month + $4 per employee |
| Yes | $500 | 1% to 1.5% mutual fund expense ratio | $750 per year + $20 per participant |
| Yes | Varies | $40 annual fund fee; 0.15% annual custody fee | Varies |
Provider | Online Only | Setup Fees* | Annual Fund Fee/Other Fees | Admin/Recordkeeping Fees |
|---|---|---|---|---|
| Yes | Varies | 0.12% average per fund; $50 upfront + $25 annual lending fee | $5 per month, per employee |
| No | Varies | $24 per year, per custodian; 0.05% to 1.25% mutual fund expense ratios | Varies per plan size |
| Yes | Varies | 0.45% to 4.5% mutual fund expense ratios | $20 per year, per participant |
| Yes | Varies | Employee: 0.50% of balance + 0.07% average fund fees | $120 per month + $4 per employee |
| Yes | $500 | 1% to 1.5% mutual fund expense ratio | $750 per year + $20 per participant |
| Yes | Varies | $40 annual fund fee; 0.15% annual custody fee | Varies |
*Setup fees may vary by location, business type, and plan type. The value listed here is the most typical setup fee cost. If “varies” is listed, the provider doesn’t list a setup fee, so visit the provider websites for specific pricing information.
Vanguard: Best Overall for Low-cost 403(b) Plan with Access to a Wide Range of Mutual Funds
- Investment Options
- Additional Services
- Costs
In a 403(b) plan with Vanguard, potential investments options include:
- Money market mutual funds
- Bond funds
- Equity funds
- International funds
- Target date funds
Vanguard is one of the best 403(b) companies because it offers straightforward, cost-efficient plans for qualifying nonprofit organizations. It provides access through 403(b) plans to more than 50 of the best mutual funds in the industry but doesn’t have additional services, such as banking, which may benefit an employer.
Type of Fee | Fee |
|---|---|
Recordkeeping | $5 per month, per employee |
Annual Fund Expense Ratio | 0.12% average per fund |
Lending | $50 upfront plus $25 annually |
Vanguard is the best overall 403(b) provider because it offers nationwide, inexpensive, diversified investments and retirement plans. It has more than 50 professionally managed mutual funds that are great for focusing on a long-term, passive investment.
This well-established firm with a strong reputation is the second-largest mutual fund company globally―as of March 2022—with more than $8.1 trillion in assets under management. It’s the gold standard in the industry and even has four of the top five individual mutual fund accounts.
Financial advisers drive Vanguard’s business. As a result, Vanguard doesn’t have offices around the country where clients can get help. It provides clients with customer service online and over the phone. However, those who need additional assistance can also enlist the help of an adviser, most of whom offer Vanguard products.
Fidelity: Best for Employees Who Want In-person Guidance on 403(b) Plans
- Investment Options
- Additional Services
- Costs
Investment options through a Fidelity 403(b) include:
- Target allocation mutual funds
- Target date funds
- Money market mutual funds
- Bond funds
- High-yield bond funds
In addition to 403(b) plans, Fidelity offers many services, such as
- Investment advice
- Cash management
- Brokerage services
- Education savings plans
- Annuities
- Life insurance
Type of Fee | Fee |
|---|---|
Custodian | $24 per year |
Account Maintenance & Recordkeeping | Varies per plan size, which is typically a flat fee |
Mutual Fund Expense Ratios | 0.05% to 1.25% |
Fidelity is one of the best 403(b) companies because of its large network of offices, making it ideal for participants wanting in-person guidance and individual investment advice. It’s one of the largest financial service companies in the world and provides a host of banking and brokerage services in addition to 403(b) plans.
With nearly $4.3 trillion under management, Fidelity also ranks high on the list of the largest mutual fund companies. While it’s one of the best 403(b) providers, it’s undoubtedly not the cheapest, nor does it offer investment options that aren’t available elsewhere.
It has strong customer service when compared to most other national providers. Unlike most other companies on this list, it has an extensive network of investor centers where you can work with individual advisers. It also provides customer service through its website and over the phone.
T. Rowe Price: Best for Providing Participants With High-quality Market Research
- Investment Options
- Additional Services
- Costs
T. Rowe Price manages nearly $1 trillion through more than 90 mutual funds, including:
- Stock funds
- Bond funds
- Money market mutual funds
- Target date funds
Aside from 403(b) plans, T. Rowe Price provides several services, such as:
- Independent market research
- Education savings plans
- Separate retirement planning solutions
- Investment advisory services
- Securities brokerage
While T. Rowe Price was founded as an asset management firm, it also provides a full suite of investment management and financial services. The firm emphasizes research and investor education, which is where it can add value to 403(b) plans.
Type of Fee | Fee |
|---|---|
Mutual Fund Expense Ratios | 0.45% to 4.5% annually |
Account Service Charge | $20 per year, per participant |
T. Rowe Price is one of the best financial services firms for providing financial literacy and research tools to individual investors. It offers high-quality market research and investor education tools so that participants can make informed decisions about their saving and investment strategies.
It even has its own line of mutual funds to 403(b) clients, high-value, independent research, and a host of additional services. Although its operation centers on fund management, it also provides a host of investment advisory and brokerage services, education savings plans, and additional investment services for assets outside of 403(b) plans.
The firm doesn’t have retail offices. Its funds and investment products are available through independent financial advisers around the country. However, if you go directly to T. Rowe Price for a 403(b), you aren’t going to get a dedicated adviser. Customer service can be accessed by phone and its website.
Human Interest: Best for Streamlined Process, Which Saves on Administrative Costs
- Investment Options
- Additional Services
- Costs
Human Interest provides limited investment options. Still, the funds it offers typically are the most popular investment vehicles for retirement accounts and provide ample opportunities for participants to grow their assets. Its investment options include:
- Mutual funds
- Target date funds
The primary 403(b) services it offers include:
- Plan design and administration
- Recordkeeping
- Trade processing
- Guidance on investment options
- Financial literacy courses and employee resources
Type of Fee | Fee |
|---|---|
Account Service Charge | Starting at $120 per month plus $4 per employee |
Employee Pricing | 0.50% of account balance annually plus 0.07% average fund fees |
With easy setup and administration, Human Interest provides a streamlined 403(b) plan process with upfront pricing. Administrative aspects, such as enrollment, payroll sync, and compliance, are streamlined or automated by the company. This makes Human Interest and its 403(b) plan great for small business owners willing to use an online provider for ease of use to save time and money.
Compared to other 403(b) companies, this firm aims to keep administrative costs down and utilizes flat administrative fees so that business owners know what to expect. While it doesn’t offer payroll services in-house, it works well with most systems and efficiently provides a core group of services.
It’s almost entirely online, with no retail offices around the country for clients to get guidance. Also, it doesn’t list additional services that many other providers offer. However, you’ll have a dedicated account management team to help you set up and administer your plan. You can message through the company’s website or contact a rep via phone.
American Funds: Best for Clients Wanting Advisers to Walk Them Through the Process
- Investment Options
- Additional Services
- Costs
Investment options available through American Funds 403(b) plans include
- Growth funds
- Income funds
- Money market mutual funds
- Balanced funds
- International funds
- Target date funds
Although American Funds is a well-established and reputable mutual fund company with a wide array of investment options suitable for 403(b) plans, it provides little else in additional services. It focuses on offering well-managed mutual funds rather than banking or brokerage services that might benefit employers.
Type of Fee | Fee |
|---|---|
Mutual Fund Expense Ratio | 1% to 1.5% |
Recordkeeping | $750 per year plus $20 per participant |
New Plan Setup | $500 |
For customers wanting to use independent financial advisors to manage their 403(b) plan, American Funds is an excellent choice. In-depth questions and individual investment advice are provided by independent financial advisors licensed to sell Capital Group American Funds products. However, a member of The Capital Group Companies, the firm provides minimal customer service itself outside of routine account maintenance.
With more than $2.7 trillion under management, American Funds is the third-largest mutual fund company on this list, falling just behind Vanguard and Fidelity. The company offers more than 40 mutual funds and sub-advisory services for large institutional investors. It’s one of the best 403(b) companies for nonprofits wanting to offer a small group of diversified mutual funds and keep participants from investing in more niche products.
American Funds has a full lineup of more than 50 cost-effective mutual funds available in 403(b) plans. These funds invest in various assets and investment strategies to suit your objectives. They can be used individually or as part of a diversified portfolio.
Aspire: Best for Real-time Access to Plan Details Through Open-architecture Platform
- Investment Options
- Additional Services
- Costs
Investment options available through Aspire 403(b) plans include:
- Growth funds
- Income funds
- Money market mutual funds
- Balanced funds
- International funds
- Target date funds
In addition to 403(b) plans, Aspire offers the following types of plans:
- 401(k) plan
- 457 plan
- Individual retirement account (IRA) plan
- Defined benefit plan
- Health savings account (HSA)
Type of Fee | Fee |
|---|---|
Annual Fund | $40 |
Annual Custody | 0.15% of account value |
With more than 10,000 investment options, Aspire offers a 403(b) plan with open investment choices for any size plan. It has a complete suite of smart retirement solutions featuring a web-based plan search and fund search through InvestLink. These searches allow for easy, real-time access to all plan details through its open-architecture platform.
This access provides flexibility for advisors and participants with transparent and competitive pricing. The company works with school districts, religious organizations, nonprofit professionals, and healthcare workers to configure a 403(b) plan that best works for your organization.
Aspire also promises access to money managers and investment strategists as part of its customer service. It offers help with vendor consolidation, participant education, and upfront and transparent pricing. You can contact the company through the mail, phone, online chat, and the online form on its website.
How We Evaluated the Best 403(b) Companies
Employers who utilize 403(b) plans have particular needs because setup and administration can be more difficult due to eligibility restrictions. To identify the best 403(b) providers, we considered the following criteria:
- Ease of setup: How easy employers can set up and administer a 403(b) plan
- Investment options: The diversity of investments permitted within a 403(b) from different providers; investment options for 403(b) plans are limited to annuities, mutual funds, and target date funds
- Costs: The relative costs of plan administration and investment options with different providers
- Customer service: The ability of providers to help with plan setup and administration as questions arise
- Additional services: What service providers offer in addition to 403(b) plans that might be helpful for an employer
- Assets under management: The amount of 403(b) assets managed by a provider
Alternatives to a 403(b) Plan
A 403(b) is only appropriate for certain nonprofits. If you want to set up a retirement plan for a small business, a 403(b) probably won’t work for you.
Some small business alternatives to 403(b) plans include:
- Traditional 401(k): If you have more than 12 employees in your business, a 401(k) plan may be your best option. It allows you to contribute up to $61,000 per year from a combination of employee deferrals (max $20,500), employer matching (max $20,500), and discretionary employer profit-sharing ($19,500).
- Safe Harbor 401(k): For-profit companies wanting to structure 401(k) plans to make maximizing contributions easier can qualify their 401(k) as a Safe Harbor plan. Safe Harbor 401(k) plans include generous matching requirements for employee salary deferrals. In exchange, Safe Harbor 401(k) plans exempt themselves from nondiscrimination testing, making it easier for company owners and highly compensated employees to maximize their contributions even if rank-and-file employees don’t participate.
- Savings Incentive Match PLan for Employees (SIMPLE) IRA: A SIMPLE IRA is much less expensive and easier to administer. It allows participants to contribute up to $28,000 annually and to split between employee salary deferrals (limited to $14,000). It also has employer matching (up to another $14,000), and you must match employee deferrals up to 3%. You can reduce the match, but you have to match at least 1% and can’t match less than 3% in more than two years during a five-year period.
Bottom Line
Non-profit organizations that qualify for a 403(b) plan can provide employees with a great retirement investment plan. Each of the providers offers slightly different benefits and retirement strategies. Determine which benefits are most important to you and your employees and choose the provider that best aligns with your company’s needs.
