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Starting a 401(k) Plan for Small Businesses: Part 2

Starting a 401(k) Plan for Small Businesses: Part 2

Welcome back to our blog post series, “Starting a 401(k) Plan for Small Businesses”. If you missed part 1, click here.

In part 2, we are covering important items to look for when selecting a small business 401(k) provider. 

Why It’s Important 

Many small business 401(k) providers promote a low-cost fee structure, yet hide the high fees in the fine print.

To help you avoid falling into the hidden fee traps (and to make sure you’re getting the most value for your money), we’ve prepared a list of questions to ask when comparing small business 401(k) providers. 

(Pro Tip: If you can’t find the answers to these questions online, give them a call and ask. If they can’t give you the answer over the phone, then maybe it’s a sign that they aren’t a good fit.) 

What To Look For When Choosing A Provider

When choosing a small business 401(k) provider, it’s easy to overlook small things that end up having a big impact on your plan. That’s why it’s important to do a thorough “background check” when researching your 401(k) provider candidates.

Below are some questions that you will want to ask providers during your research. 

Plan Set-Up

  • Do you provide the 401(k) plan documents?
  • Do you provide an Investment Policy Statement? 
  • Do you support auto-enrollment?
  • Do you offer Safe Harbor 401(k) plans?

Employee Enrollment and Participation

  • Do you handle all employee notifications and enrollment notices?
  • Do you offer US-based support?
  • Do you allow employees access to view/change their account information from a mobile device?

Administration and Recordkeeping

  • Are you a 3(16) fiduciary?
  • Do you integrate with payroll software? 
  • Do you track employee eligibility? 
  • Do you review and approve hardship withdrawals, loans, and QDROs?

Compliance and Reporting

  • Do you conduct nondiscriminatory testing?
  • Do you continuously monitor for ERISA and DOL compliance? 
  • Do you prepare and file the Form 5500 Annual Report? 
  • Do you prepare and file the Form 8955 Report?

Investment Management

  • Are you a 3(38) fiduciary? 
  • Do you offer managed investment portfolios?
  • Do you offer automatic rebalancing? If yes, how often? (Daily, weekly, monthly, quarterly, yearly, etc.)

Pricing and Fees

  • What is the setup fee? 
  • What is the per-employee fee?
  • Are there any recurring fees? How much?
  • Do you receive commissions or 12b-1 fees for mutual funds?
  • Are there any custodial, advisory, or asset-based fees? How much?

We know that this is a lot to take in, which is why we created an easy-to-use comparison chart that you can use when researching 401(k) providers for your small business.

Join us next week when we take a look into what you can expect when opening a small business 401(k) plan.

Photo by Kampus Production from Pexels.