Shopping for a new 401(k) provider for your small business? Here is our guide to evaluating 401(k) provider options in 2022.
So you’re shopping for an improved 401(k) plan, congrats! Whether you inherited a clunky plan from your predecessor or you’ve outgrown your current solution, there’s a lot to keep track of. The good news is with the Department of Labor cracking down on bad 401(k) providers, it’s easier now to identify the best 401(k) providers from the duds. Use this 401(k) shopping checklist and this 401(k) provider comparison worksheet to quickly identify winners and build a short list of your ideal providers. This guide will help you compare 401(k) plan providers and choose one that serves your needs.
Before I go on, if you take only one thing away from this post, I recommend this: be prepared — before you enter a vendor call — and ask simple and direct yes/no questions to get around fancy marketing speak. (For example, “help selecting and monitoring investments” does NOT necessarily mean that your 401(k) provider is taking on the fiduciary liability associated with your plan’s investments. Try asking specifically for the legal type of fiduciary that provides the most protection, a 3(38) fiduciary: “Responsible for selecting and monitoring investments, acts as the 3(38) fiduciary.”)
The work a 401(k) provider does can be divided into five categories:
Because the 401(k) shopping experience involves two phases at minimum, I’ve prioritized a list of the top fifteen questions you should ask all of the 401(k) providers that you’re interviewing. Use these questions to help you compare 401(k) companies, and download the guide to be even more prepared.
401(k) Provider Search Phase One: Discovery
Goal: Find out if the provider offers low fees, help for employees, and a tech-friendly platform to minimize manual work for you.
If any of these answers are “No,” cross them off your list and move on. This provider will leave the fiduciary responsibility and administrative work on your plate.
401(k) Provider Search Phase Two: Compare 401(k) Plans Under the Surface
Goal: Determine which of the 401(k) providers can scale as you grow, effectively engage employees to join and save, and will take on the lion’s share of compliance testing work.
If any of these answers are “No,” they can still be a good provider but go into this knowing that you will be on the hook to run compliance test calculations on your own and without automatic enrollment support, your participation rates can take a big hit.
For a deeper dive and our full set of questions to help you thoroughly vet your next 401(k) provider, download our ebook: The 401(k) Shopping Checklist: What to Ask When Evaluating Retirement Plan Providers.
Give your employees more than just a 401(k), join the movement.