How to Choose the Right 401k Plan Provider for Your Company

How to Choose the Right 401k Plan Provider for Your Company

Picking the right retirement services provider for your company’s 401k plan is a major decision that will impact the financial future of your employees. With so many different providers to choose from, it can be hard to narrow down your choice. However, by understanding your business needs and researching factors like fees, experience, fiduciary responsibility, service, and compliance support, you can make a well-informed choice. 

Understand Your Company’s Needs

Before you start looking for a provider, it’s important to understand your company’s needs. You’ll want to consider factors such as your company’s size, employee count, and the specific goals of your company’s retirement plan. 

A small business may be more concerned with saving money on fees. Larger-sized companies, on the other hand, may value customer support more given their more complex administrative needs. Either way, you’ll want a clear picture of what your business is looking for before researching and comparing providers. 

Research and Compare Providers

There are tons of 401k providers to choose from. That is why you’ll want to evaluate providers along criteria that are most in line with your business’s specific needs. Generally speaking, this will involve narrowing down providers based on their administration services, recordkeeping, fiduciary responsibility, investment options, performance, cost transparency, and reputation.  

Assess Recordkeeping and Plan Administration Services

It’s critical that you assess a provider’s plan administration and recordkeeping capabilities. A reliable 401k provider should be able to provide comprehensive recordkeeping to keep track of contributions, investments, and distributions. This ensures your retirement plan functions smoothly over the long term. and it minimizes potential errors that could lead to penalties or additional fees. 

Speaking of penalties, you’ll also want to make sure your provider can stay on top of the complex regulations that govern business retirement plans. Pick a provider with robust compliance support to help you with automatically enrolling participants, employer matches, and staying on top of the latest legislative changes to avoid costly penalties. 

Lastly, you’ll also want to review a provider’s reporting. It’s critical that your plan’s reporting is punctual and accurate. You’ll want a provider that can create easy-to-understand reports to keep you informed about your plan’s investment performance and help your employees track their progress.

Consider Your Fiduciary Responsibility

As a business owner, finding the right 401k plan is not just about offering your workers a valuable benefit. It’s also about minimizing risks and oversight that come with managing the plan itself. As an employer, you serve in a fiduciary capacity in relation to your retirement plan. That means you’re legally responsible for making sound financial decisions on the behalf of your plan’s participants. However, this responsibility doesn’t have to rest entirely on your shoulders.

A critical factor to consider when choosing a 401k plan provider is the level of fiduciary support they are willing to provide. Their support can help protect you, and your business from potential legal and financial consequences. With fiduciary support, a 401k plan provider can offer expert guidance and oversight on investment selection, plan administration, and compliance with relevant laws. 

Check Fund Options and Do an Investment Performance Evaluation

Your provider’s investment options and performance are of critical importance. After all, they are the main drivers behind you and your employees being able to retire with security. Look for a provider that can offer a 401k with a wide assortment of investment choices (e.g. mutual funds, target-date funds, index funds, etc.) that can cater to a variety of different risk tolerances, financial goals, and levels of investment knowledge.

Take the time to also evaluate the historical performance of their investment options. Granted, past performance isn’t a guarantee of future returns, but a provider’s track record will give you insight into their investment management capabilities. You’ll be able to see if they’re consistent and competitive across a variety of market conditions. 

You may also want to consider whether a provider’s investment options fit with your company’s views on environmental, social, and governance (ESG) factors. This helps ensure your 401k aligns with your company’s culture and resonates with your employees. 

Review Fee Structures and Transparency

Excessive fees can seriously hinder investment returns. Make sure you understand a given provider’s fee structure, including their administration fees, investment fees, and any other costs associated with your plan. A reputable provider should disclose all their fees upfront, which makes it easier for you to compare their costs to those of the other providers.

How Fischer Investment Strategies Can Help You Further

At Fischer Investment Strategies, we understand the critical role a retirement services provider plays within your company. The right 401k plan has the power to secure the future financial security of you and your employees.

For this reason, it’s necessary to have a clear understanding of your company’s specific needs. Then, when researching potential providers, you can analyze them properly along lines such as administration and recordkeeping services, investment options and performance, fee structure and cost transparency, and overall reputation and customer satisfaction.  

However, you do not have to do all the heavy lifting yourself. By working with an experienced financial advisor, you can have help in making a well-informed choice. Together we’ll help find the plan that works for you, your employees, and your business. 

Don’t leave your employees’ financial future to chance. You can reach out to our Westlake office at (805) 418-7686. Or, fill out a contact card, and we’ll reach back out to you. 

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This commentary reflects the personal opinions, viewpoints and analyses of the Fischer Investment Strategies, LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Fischer Investment Strategies, LLC or performance returns of any Fischer Investment Strategies, LLC client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Fischer Investment Strategies, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

Financial Advisor at Fischer Investment Strategies | Website | + posts

Ted Fischer is a Fee-Only Certified Financial Planner® & fiduciary, and the founder of Fischer Investment Strategies.

Drawing from more than 25 years of experience in the financial services industry, Ted's expertise includes retirement planning, investment analysis, tax planning, estate planning, and insurance.

Ted has an extensive academic background. He received his Certified Financial Planning (CFP®) designation from UCLA in 2011. He became a Qualified Plan Financial Consultant (QPFC®) and an Accredited Investment Fiduciary (AIF®). Ted has a Bachelor of Science in Marketing, with a minor in Finance, from San Diego State University.

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