How to evaluate a 401(k) plan provider
It always seems like the most important time to have a plan in place is when you’re in the midst of uncertainty. When anything can happen, life’s twists and turns seem easier to handle if you know to expect the unexpected.
With so many questions about the future of the economy up in the air, many employers have realized it’s vitally important to work with a 401(k) plan provider they can trust and rely on; they want to help secure their (and their employees’) future, after all.
Unfortunately, not every recordkeeper is the right fit for every business or every plan sponsor. As such, it’s important to understand why plan sponsors leave their plan providers in favor of a different one and how to evaluate whether your recordkeeper is the right fit for you, your business, and your employees.
Top reasons why employers leave 401(k) plan providers
Many financial advisors or employers sponsoring a retirement plan have fired or quit working with a recordkeeper, and the reasons why are relatively consistent:
High fees and expensive pricing
It’s no secret that operating a retirement plan will involve some fees, but it’s important that your plan provider is transparent and upfront with their pricing. As a plan sponsor, you have a fiduciary responsibility to keep fees reasonable for employees relative to the service they are receiving, and one of the most common reasons plans leave recordkeepers is due to excessively high fees.
Make sure you have a solid understanding of the pricing and fee structure of your plan; are the fees flat or asset based? What are the recordkeeping costs and investment fees? Are they reasonable to employees in relation to the level of service provided? Ask yourself these questions annually to help determine if it’s time to consider moving to a different recordkeeper. Just keep in mind that different 401(k) providers offer different services—so even if one recordkeeper may have slightly higher pricing upfront, the level of service and features provided could far outweigh a slight increase in cost.
Poor customer service
Most business owners and employees aren’t experts in the financial industry—let alone experts in running a 401(k) plan or successfully saving for a future retirement. That’s where your plan provider’s customer service team comes in. Service level, knowledge level, communication skills, and a willingness to help both the plan sponsor and employees on the path to retirement readiness are paramount to being a good recordkeeper.
It all starts with the organizational structure and leadership at the helm. Without ongoing training and experience, the recordkeeper’s customer service team may not have the knowledge to effectively and accurately help plan sponsors and employees navigate their plan. Any inaccurate information given to employees or plan sponsors while talking to a customer service representative can cause serious headaches down the road—so it’s important to be able to rely on the accuracy of the information they’re providing you. It’s also crucial that you are able to talk to a real person when you have questions, and they should be dedicated to taking the necessary time with you to answer your questions rather than trying to keep call times as low as possible. You’d much rather have resolution after one call than have to call back multiple times because you didn’t get all of your questions answered.
If your current 401(k) provider has high fees, expensive pricing, or poor customer service, you may want to consider researching other options.
What plan sponsors need to know about changing retirement plan providers
What to look for in a good 401(k) plan provider
Whether you’ve decided to leave your current 401(k) provider and look for a new one, or you simply want to evaluate whether your current provider is the right fit for you, there are a few qualities you’ll want to look for to ensure they have your (and your employees’) best interests at heart.
1. Make plan setup and processing simple
Given the number of people who work remotely now, it’s important for your recordkeeper to offer online or virtual options for plan setup, including e-signatures and secure e-delivery. Your recordkeeper should offer plenty of guides and resources to help walk you through the setup process and should have clear forms and processes to help you navigate your responsibilities as a plan sponsor. Even better, some recordkeepers offer a dedicated installation and conversion representative to walk you through the steps for a successful plan setup.
Additionally, your recordkeeper should offer support for plan design provisions you may need down the road, ensure easy updates to processing—like adding a newly eligible employee—are simple for the plan sponsor, and offer integration options with other benefits processes.
2. Help drive employee engagement
Likely, one of your main incentives in sponsoring a 401(k) plan is helping employees prepare for their future retirement, including yourself as employee #1 in the plan. Your plan provider should be focused on driving employee engagement by making it easy for eligible employees to enroll in the plan, make investment and contribution changes, and request distributions or loans if allowed by the plan document.
Additionally, your recordkeeper should offer easy-to-use websites for employees, plan sponsors, and the financial advisor on the plan. Benefit statements, annual reporting notices, and notifications should be easy to find, and account information should be easily available. The plan provider should also offer engaging tools and resources for employees and employers to help them understand how to maximize their retirement plan strategy and reach their retirement goals.
3. Offer agility to plan sponsors and employees
These days, your recordkeeper needs to be able to quickly and efficiently respond to heavy volatility, changing markets, and new regulations—such as the SECURE Act, MEP/PEP arrangements, as rules and regulations change in the industry.
4. Focus on strong customer care
Finally, you’ll want to evaluate the recordkeeper’s level of customer care—and not just for employees, but for the plan sponsor and the financial advisor on the plan as well. When you call for support, a real person should answer the call—not an automated system that traps you in a seemingly endless phone tree loop.
It’s also important for recordkeepers to keep advisors in the know with what’s happening with the plan, so make sure your plan provider offers support to your advisor and will work in conjunction with them to help make the plan successful.
We understand what it takes to be a successful 401(k) recordkeeper. For more information on our recordkeeping services or 401(k) plan options, contact us at 800-345-6363.