How to find the best 401(k) provider: an employer’s guide

Finding the right 401(k) provider for your business may seem relatively straightforward, but this isn’t always the case. Plan providers can vary in terms of cost, services, and technology, which means you often have to do the legwork and due diligence to find a plan provider that aligns with your business needs. 

This article can help make the selection process easier to understand. To help you evaluate how a 401(k) provider stacks up against the competition, we’ll dive into the qualities that plan providers can offer and which ones are often prioritized. 

What should you look for in a 401(k) plan provider? 5 things to consider

1. Fees and overall cost

One of the most common questions employers ask about a 401(k) provider is the overall cost and fees they charge. These fees can vary depending on the service level of your plan and the features of the plan itself, but it is a key area to evaluate and monitor. Beyond the typical recordkeeping and participant fees, several other fees may not be very obvious—or can be considered indirect—to employers. 

Below are some of the fees you should to take into account when comparing plan providers.

• Recordkeeping fees: A recordkeeping fee is typically a recurring monthly or annual fee that plan providers charge for administering your plan.

• Revenue sharing fees: Revenue sharing fees are charged by or added to the expense ratios of mutual funds. These fees are paid to the recordkeeper instead of the investment manager to help offset the cost of your 401(k) plan administration and may be overlooked as they’re factored into overall costs. As a rule of thumb, Human Interest does not recommend any investments with these fees in our 3(38) managed lineup.¹

• Transaction fees: These are fees charged for specific services, such as plan termination fees, distribution fees, and loan initiation fees. 

• Mutual fund fees: Mutual funds, which are the primary investment options in most 401(k) plans, charge an annual fee to cover their operating expenses. This fee, known as an expense ratio, pays for fund management and is expressed as a percentage of your investment in the fund.

Already have a 401(k) plan? Benchmarking your existing plan against other providers can help determine if your plan’s services and fees are competitive with other plans—or if it may be time to begin evaluating other 401(k) plan providers. 

2. Assistance with fiduciary responsibilities 

Overseeing a retirement plan requires managing several recordkeeping and fiduciary duties, and therefore potentially a lot of manual paperwork and liability for the employer. Recordkeeping services that can take up a lot of an employer’s time and effort include annual nondiscrimination testing, filing the form 5500, and responding to IRS audits. 

If you need extra support with daily administrative functions, your plan provider may offer assistance as a 3(16) fiduciary services provider. 3(16) services are meant to offset the legal responsibilities for managing the regulatory and administrative aspects of a 401(k) plan. The types of tasks each provider administers can be unique, so it’s important to know what services they offer and how they compare to other providers.

Some examples of 3(16) fiduciary responsibilities a plan provider might take on are authorizing withdrawals, ensuring a loan taken out against a 401(k) meets IRS guidelines, and securing a fidelity bond. 

3. Modern technology

It’s common now for plan providers to have modern technologies that can help streamline and simplify plan administration for both you and your employees. For example, a plan provider (like Human Interest) that integrates with your payroll provider automatically updates changes in contribution amounts when an employee initiates these updates. This allows employers to better ensure accuracy regarding retirement and contribution data, without manual coordination with their payroll provider. 

To help employees stay on track with their long-term goals, some 401(k) plans provide automated portfolio rebalancing. This is especially helpful for those who may not have the time or expertise to manage their own investments, as it keeps their portfolio aligned with their chosen strategy. It’s important to remember that while this service is a useful tool for managing risk, it doesn’t guarantee a profit or protect against loss.

4. Customer support and employee experience

In addition to the plan administrator, the employee experience is just as important. It’s likely that at some point, both you and your employees will need to rely on your plan provider’s customer support service. A good customer service team should help smoothly onboard you and your employees to their new 401(k) plan and assist you with any questions or concerns you may have with managing your plan. 

Lastly, dependent on your needs, it can be beneficial to search for a plan provider who has a vast suite of resources to offer your employees, which can be especially valuable for smaller businesses. 

5. Credibility 

A provider's reputation is a key indicator of their quality. Industry awards, positive customer reviews, and a strong standing among competitors offer valuable insight into the kind of experience you can expect as a client.

For example, Human Interest recently won the 2023 Silver Stevie Award for Achievement in Customer Satisfaction by the American Business Awards³, which indicates that we have a deep understanding of the industry, customer needs, provide exceptional customer support, and have user-friendly technology. 

Consider a 401(k) with Human Interest

Choosing a 401(k) plan provider requires you to consider the plan features that they can offer their employees, as well as their pricing, customer support, and overall experience with their platform. At Human Interest, we take pride in ensuring our customers are satisfied with all aspects of our services. Contact us today to learn how you can start a plan with us.

* Applies to all transaction types. For non-rollover distributions, shipping and handling fees may apply to requests for check issuance and delivery.

1. Investment Advisory services are provided through Human Interest Advisors LLC, a Registered Investment Adviser and subsidiary of Human Interest Inc. For more information on our investment advisory services, please visit http://www.humaninterest.com/hia/.

2.  This program is administered and offered 3% cash back is available to eligible individuals making $60,000 or less in gross income and contributing at least 8% of every paycheck to an eligible Human Interest plan over a 12-month period. Must submit a claim form to claim the award. Minimum award is $100 and max is $250. Additional requirements apply. See terms and conditions. This program is administered and offered by Human Interest Inc. Its subsidiary and registered investment adviser, Human Interest Advisors will earn more in asset-based fees if a plan participant increases their contribution in connection with the program. 

3.  Human Interest was awarded the "Silver Stevie Award" medal in the 2023 American Business AwardsⓇ for "Achievement in Customer Satisfaction." Winners were determined by the average scores of more than 240 professionals worldwide in the three-month judging process. Read more about the winning organizations: http://stevieawards.com/aba/2023-stevie-award-winners and criteria for the award here: https://stevieawards.com/aba/judging-awards-process. American Business Awards are registered trademarks of Stevie Awards, Inc. Stevie Awards, Inc. is not affiliated with Human Interest. This recognition is not indicative of Human Interest’s future performance.