401(k) Providers

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401(k) Providers Buyers Guide

Understanding the cost for a 401(k) provider can be confusing, with a wide variety of plans available, and variability and complexity in fee structures. It’s important to be diligent and thorough when evaluating 401(k) provider options.  

What is a 401(k)?

A retirement program, typically offered in the form of a 401(k) plan, is a cornerstone of a comprehensive employee benefits plan offering and will help companies attract and retain exceptional employees.  Additionally, with tax advantages for both the participant and employer, 401(k) plans can be a sound business decision for many companies. 

401(K) PROVIDER SELECTION PROCESS

Tax laws and regulations provide strict guidelines for all 401(k) plans to follow. Thus, when comparing providers, you should consider the investments offered, features/services offered, flexibility in plan design, and overall financial stability and structure. Your company’s procurement processes, objectives, and time will heavily influence the time it takes to select a provider, but a general guideline is to allow 60-to-90 days.

PHASE 1: IDENTIFY & PREPARE

WHAT IS YOUR CURRENT SITUATION AND GOALS?

Is a 401(k) program a new venture for your organization? If so, allow yourself more time to work through the learning curve, and consider hiring an expert to help you. Are you replacing an existing solution?  Clearly inventory and document your existing program’s features and functionality.

Pinpoint areas that aren’t working or are missing, and identify preferred change with a new provider partner. However, don’t also forget to document what IS working, lest you lose that with your new provider. Having a defined list of criteria, and outlining your “must-haves” and “nice-to-haves” will be invaluable as you undertake the evaluation process.

WHO ARE THE INTERNAL STAKEHOLDERS?

In addition to evaluating employee needs, be sure to consider the priorities of your human resources, employee benefits and financial colleagues to ensure their needs are met. They may be involved directly in the selection process or just on the sidelines, but ensure you keep their objectives top-of-mind as you go through the evaluation process

PHASE 2: COMPARE & EVALUATE

WHAT 401(K) PROVIDERS SHOULD I CONSIDER?

There are many types of firms providing a variety of 401(k) services. When you’re just starting out, there are some ways to start your research:

Be sure to review your list of current providers, especially those with whom you have a successful relationship. Your financial institutions likely offer 401(k) programs, and many payroll providers and insurance brokers do as well.
401(k) providers come in all shapes and sizes; from well-established, financial heavyweights, to tech-focused newer entrants, and everything in between. Some focus on smaller companies and others focus on medium- or large-sized businesses. Your company culture and requirements will likely guide you in a certain direction, though if you have the flexibility, we encourage you to evaluate several different types of providers to get a full understanding of the landscape.

Depending on your company’s objectives, you may want to find a provider who offers: