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What To Look For When Choosing A 401(k) Provider

Choosing a 401(k) provider can be overwhelming, from comparing administration and recordkeeping services to investment options and their costs. 

What services should you be looking for? Features? What are the fees? How much is too much for plan fees? 

Here’s a quick guide to what you should be comparing and what to expect in fees and costs, all so you can make the best choice when it comes to choosing a 401(k) provider. 

Plan Set-Up

While plan setup can be done quickly and is relatively easy, is an important step that shouldn’t be overlooked. When comparing plan providers, here are some important things to look for –

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

Employee Enrollment and Participation

Employees want to have easy and quick access to their investments, and an efficient means of communication with plan providers when questions or concerns arise. 

A good plan provider should be able to provide your employees with the following – 

  • Handle all employee notifications and enrollment notices 
  • Offer US-based support 
  • Allow employees access to view/change their account information from a mobile device

Administration and Recordkeeping

401(k) plan administration and recordkeeping are time-consuming, making them the biggest hurdles businesses face (and oftentimes the reason why businesses don’t offer plans). 

In turn, finding a provider who handles these services has become highly desired, if not required, by employers. For stress-free plan management, ask providers if these features are included in their administration and recordkeeping services –

  • 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

The IRS can be scary and stressful to deal with, yet is an unavoidable part of sponsoring a 401(k) plan. A good plan provider however will not only help ensure your plan is in compliance, but will also take the mundane tasks associated with it off your hands. Ask if they offer these compliance and reporting services –

  • 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

The whole point of offering a 401(k) is to help your employees save for retirement and meet their retirement goals, which is where investment management comes in. Your ideal provider should –

  • Be a 3(38) fiduciary 
  • Offer managed investment portfolios
  • Offer automatic rebalancing

Pricing and Fees

Many 401(k) providers are notorious for charging hidden, excessively high fees that cost employers tens of thousands of dollars. Even worse is that they also charge participants unreasonably high fees that eat away at their investment. 

If you take anything away from this post, let it be that you get a clear and firm answer from providers on what fees they charge and how much they cost –

  • 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?

While most providers will charge a varying amount for the above fees, Saveday doesn’t charge a penny for employer costs, and charges employees an industry-low AUM fee of 0.35%. If you’re paying more than this, you’re paying too much.

Doing your due diligence when comparing providers is crucial to ensure you’re choosing the right provider who can cover all your needs at a price you and your employees can afford. 

Saveday includes all of these services and features in our 401(k) plans. Employers don’t pay a penny for them, and employees pay an industry-low AUM fee that allows their investment to grow freely. Contact us to get set up!

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