Choosing a 401(k) Provider: What to Look For

How do you know which 401k plan provider is the best choice for your small business? Beware of big-name providers that use 401(k)s as cash cows with high administrative fees, high-cost funds, and commissioned sales. Increasingly, online-based 401(k) providers have emerged to provide flexible, low-cost, transparent service, catering to small businesses and entrepreneurs. Here are some of the top features to look for in a 401(k) provider:

• Low fees with no hidden costs
• Easy setup
• Investment flexibility
• High Google review rating
• Optional investment advisory services
• Financial wellness tools
• Dedicated advisor support
• Support for multiple payroll integrations

No Asset-Based Record Keeping and Advisory Fees

The best providers offer a low, transparent monthly flat fee. When you partner with Ubiquity as your 401(k) provider, not only do you pay an affordable flat fee, but you never pay a charge on savings amounts or any commissions. Our services are also free from asset-based record keeping or advisory fees.

There are four main ways 401(k) plan providers charge for their administrative services:

• Assets Under Management Fees – a percentage of the plan’s total assets, charged annually
• Flat Fees – one standard, fixed fee charged monthly, quarterly, or annually
• Per-Person Fees – a small dollar amount multiplied by every plan participant
• Transaction Fees – charges for actions like loan applications or fund lineup changes

Some 401(k) providers charge all or some of these fees, covering you with unnecessary costs. Instead, choose a less expensive option offered by providers such as Ubiquity, with no frivolous add-ons to worry about.

Ease of Setup

Setting up and managing a 401(k) plan shouldn’t require a computer science degree or extensive financial training. You want a plan that can be easily set up and managed.

A good 401(k) provider can set up your plan in as little as 15 minutes. Once the plan becomes available, it should be easy for plan participants to get on board. Auto-enrollment is the gold standard of plan debuts, as it allows participants to sign up quickly and easily, increases the participation rate, and earns your small business an extra $500 tax credit (on new plans) for the next three years.

Keep in mind that payroll integration is not always a given. Some plan providers like Ubiquity have greater capabilities to support multiple payroll integrations than others.

Investment Flexibility

A 401(k) account allows for a range of investment choices, from index funds and bond funds, large-cap and small-cap funds, real estate and foreign funds, and more.

Most 401(k) providers have their own brokers they want you to use for your investment choices. However, these brokers may limit what families of funds participants can select. They may focus on funds with heavy commissions, sales loads, or 12b-1 fees. Their set of prepackaged options may not be the best fit for you and your employees. Not every broker allows Roth contributions or loans taken out of the plan.

Ideally, you will be able to choose your own broker who offers the widest range of investment options, as well as tools that make fund selection and management easy as pie.

Optional Investment Advisory Services

A 401(k) provider may command a higher price by locking you into an overinflated contract with services you’ll never need. The best small business 401(k) plan providers have optional investment advisory services.

You may want initial investment advice, but find you don’t need to pay monthly for access to a financial advisor. You may want to DIY or have your own investment advisor already. Perhaps your broker already provides these services, so receiving them from the plan provider is redundant and unnecessary.

Financial Wellness Tools

Empowering workers with free financial education and wellness tools helps improve employee productivity and retention, and boosts your business’ bottom line.

Help employees plan short and long-term goals toward the future. A 401(k) plan provider may offer financial wellness tools right on their website, but more commonly they partner with a user-friendly platforms.

At Ubiquity we partner with industry leader Edukate, to enrich the financial support our clients can provide their employees. Here, employees will be able to take webinars, read helpful guides, take quizzes, make calculations, set goals, and participate in contests.

We’ve also compiled 401(k) resources for savers and plan sponsors to help improve your retirement retirement readiness and financial literacy.

Dedicated Employee/Employer Support

Robo-advisors and automated support can be cheap and convenient, but also frustrating when you have a problem with your account. Nothing beats human interaction when you have questions or concerns. The best 401(k) plan providers offer phone, email, and chat support, with dedicated advisors familiar with your account.

Some companies offer employer-only support, but this can lead to bureaucratic delays and overtaxing your HR department if your employees have questions or concerns about the plan. It’s better to have a direct line where they can get prompt, efficient customer service.

Enrollment Presentation for Employer/Employee

Offering employee perks will only benefit your small business if workers know about it and actively participate. A comprehensive education program can significantly boost participation, savings, and satisfaction rates.

Some providers do on-site presentations or provide your office with all the materials you need to clearly convey the many benefits of 401(k) retirement savings plans to employees. This service should be free of charge, with providers going out of their way to make sure your company feels adequately supported.

Small Business Ratings

Media publications like The College Investor, Fit Small Business, Business.com, and the NY Times have published “top 401(k) provider” reviews. You can also check sites like the Better Business Bureau and Google Reviews to see how they treat their small business clients.

Your First 401(k) Plan? Switching Providers? We’re Here to Help

If this is your first 401(k) plan, exercising due diligence and selecting the right provider the first time around can save you the time, money, and hassle down the road. If you are unhappy with your current 401(k) provider and looking to explore alternative options, take comfort in knowing we assist clients like you all the time at Ubiquity.

We were the first provider to offer flat-fee service with NO AUM fees and NO per-participant fees in 1999. You’re not just a number to us. Whether your business has one person or 100, we value your account. Switching providers will be little more than a speedbump on your end, but it can get you the service you need at the price you can afford, with the results you desire.