Pension Options for Small Firms: The Internet and the Government Make Pension Plans More Affordable for Small Businesses. (Agenda Retirement Planning)

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In the midst of frenzied growth, most entrepreneurs have precious little time to spare a thought for their employees' golden years. And yet, about a year ago, Daniel Roth, CEO of Voice Signal Technologies Inc., based in Woburn, Mass., did just that.

At the time, the company had 19 employees, and plans were to grow fast--to 50 employees and beyond. The management team knew that they needed a strong benefits package to attract the best employees. But even in the halcyon, dot-com days of late 2000, Voice Signal needed to find a plan that would provide the most benefits for the least bucks. The company looked into a 401(k), but costs "were really prohibitive for a small company," says Barbara Winer, HR manager at the company.

Enter the Internet, which can cut costs dramatically because information and communication are channeled electronically, instead of on paper via the mail. That's virtually the only difference between an Internet-based 401(k) and a traditional plan. By using technology to eliminate people and paperwork, in most cases Internet-based 401(k) providers communicate directly with employees, which saves time for the small-business owners.

The cost and time savings were attractive enough to Voice Signal, which signed on as a beta-user with Emplanet, an Internet-based 401(k) provider, in November 2000. Today, 39 employees are enrolled, says Winer, and 401(k) administration takes up a small amount of her time, about 2 percent of her workweek--quite a difference from her experience at previous companies with standard plans.

"With a traditional 401(k), everything had to go through HR," she says. "We had to handle changing beneficiaries, remind people about the quarterly …