How to Choose the Right 401(k) Plan Provider

Author: Mike Cohen, AIF® / Reviewer: Callie Adams Farnsworth, QKA, CAFCA
5 Apr 2023 / 401(k) Resources

Your perfect match is out there – and we’re not talking about love; we’re talking about money. Specifically, we’re talking about finding the right 401(k) provider for your small business.

If you’re tired of sneaky fees or customer service that leaves you with more questions than answers, it might be time to break up with your current provider. Or if you have yet to find the 401(k) that will complete you, it may be time to start searching. But how to begin?

There are many factors to consider when evaluating different small business 401(k) plan providers, so we’re breaking it down here to simplify it for you.

Step 1: Determine Your Business Needs

Think about the size of your small business, your budget, and your employees. Do you want to manage the plan yourself or choose a low-maintenance plan that is ready to go “out of the box?” Consider:

• How many employees do you have?
• Do you have any plans to expand or shrink that number in the future?
• What is your budget for a 401(k) plan?
• Do you want a simple, no-frills plan or something more robust?
• Do you want to offer matching or profit-sharing contributions?
• What investment options do you want to offer?
• Do you have time to manage a plan? Or would you look for a full-service solution?

Answering these questions will help you narrow your options and choose a plan provider that meets your needs.

Step 2: Research Providers

Once you’ve determined your business needs, it’s time to research 401(k) plan providers. There are many providers to choose from (and yes, some of them are robots). When researching providers, consider:

• What are the fees associated with the plan?
• What investment options does the plan offer?
• What kind of customer service does the provider offer?
• Will I be able to speak with a human if and when I need help?
• What is the provider’s reputation in the industry?
• What kind of technology does the provider offer?

Be sure you know your budget by this point, so you don’t end up with sticker shock at the end.

Step 3: Evaluate Provider Experience and Expertise

When evaluating plan providers, it’s important to consider their experience and expertise. Look for a provider with a strong track record of success and experience working with small businesses. Look at:

• How long has the provider been in business?
• Does the provider work with other businesses in your industry?
• Does the provider have expertise in retirement plan administration?
• Does the provider have experience with small businesses?
• What, if any, are the provider’s ratings? Check Google Reviews, the Better Business Bureau, and other review sites.

Step 4: Review Plan Features

Once you’ve narrowed your options to a few providers, it’s time to review the plan types they offer. You want to make sure you choose a provider that offers the type of plan that is best suited to your small business. Be sure to note:

• The plan design. Is it a traditional 401(k)? A solo 401(k)? A Roth 401(k)?
• Whether or not the plan offers the opportunity for matching contributions.
• What the vesting schedule for employer contributions is.
• What investment options are available.

By reviewing plan features, you can choose a plan that meets the needs of your employees and helps them save for their futures.

Step 5: Monitor and Evaluate the Plan

After implementing a 401(k) plan for your small business, it’s critical that you monitor its performance. This includes tracking employee participation and contributions, reviewing investment performance, and ensuring that the plan remains compliant with IRS regulations. Your plan provider should provide regular reports and support to help you evaluate the plan’s performance and make necessary adjustments.