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:
Perusing lists of 401(k) providers
Asking for recommendations from your industry peers
Browsing financial blogs
Visiting an industry trade show
Talking with providers. Tip: If you find a provider you like, ask them who their key competitors are.
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:
Shortlister Connect is a tool specifically designed to be utilized by the HR and Procurement/Sourcing teams within mid-size, large and jumbo employers. Shortlister Connect allows these teams to efficiently research & identify their optimal vendor partners, track existing vendor relationships & performance and “connect” with other employers to share successes and vendor experiences.
If you are not on the HR or Procurement/Sourcing team within an employer with over 200 employees, you will not be granted access to Connect. Examples of individuals that would not be granted access include, but are not limited to: vendors, students, practitioners, researchers, other non-employers or anyone that is unwilling to identify themselves will not pass our vetting criteria. If you are a consultant, Shortlister offers a specialized product for consultants, called Shortlister Select. You can email Tom Ciccotti at tciccotti@myshortlister.com to learn more about Shortlister Select.
***Shortlister retains the exclusive right to grant or deny access to any party to ensure the privacy of the vendors in our system.
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