Shopping for a 401k provider – THIS STORY ORIGINALLY RAN AUGUST,2016
Shopping for a new 401k provider, 403b record keeper or a TPA (third party administrator) can seem overwhelming for busy HR and financial professionals that have many duties and are not experts. Whether you have inherited a plan that does not fit the company anymore or your company has outgrown your provider, shopping for a new plan does not have to be difficult. So short of a full RFP (request for proposal), ForUsAll, a new robo-record keeper, has prepared a simple checklist with just 15 questions.
The work a 401(k) provider does can be divided into five categories:
- Employee Experience
- Routine Administrative Work
- Compliance
- Cost
- Investment Selection
The first phase of your search includes whether the provider offers reasonable fees, help for employees, and a tech-friendly platform to minimize manual work for you. The specific criteria might include payroll integration, 5500 preparation, co-fiduciary status, access to a credentialed advisor and the absence of commissions and revenue sharing. (While asking a provider to act as a co-fiduciary and the use of funds without revenue sharing as well as commissions are becoming best practices, they are not a requirement as suggested by ForUsAll.)
The second phase might include a determination of whether the provider can scale as you grow, effectively engage employees to join and save, and will take on the lion’s share of compliance testing work.
- What are your average participation and savings rates in your book of business?
- Can employees easily view and make changes online on their mobile device?
- Do you support automatic enrollment?
- Can you support automatic annual increases to employee savings rates?
- Do you track employee eligibility? What work do I need to do when an employee is eligible for the plan?
- Do you review and approve hardship withdrawals? Loans? QDROs? What will my involvement be on that, if any?
- Do you provide guidance on non-discrimination testing including regular testing to determine whether the plan is heading toward failing the test?
- How often do you run non-discrimination test checks?
Many plans use an advisor to help which leads to the question of how to find the right advisor for your plan, a totally different exercise. This checklist might also be a simple way to determine if you even need to shop for a new provider. Regardless, plans should be benchmarking their plan fees regularly and going to market periodically recommended to be three-five years depending on the size of the plan.
