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 to find a plan provider that aligns with your business needs. 

This article can help make the selection process easier. 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 you should prioritize. 

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 inquire about a 401(k) provider is the overall cost and fees they charge. Sometimes these fees can be reasonable depending on the service level of your plan. Beyond the typical recordkeeping and participant fees, there are several other fees that may not be very obvious, or are considered indirect, to employers. 

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

• Recordkeeping fees: A recordkeeping fee is 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 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 share 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, or the investment vehicle in a 401(k) plan, have an operating cost. These fees, which are charged to pay fund managers and/or investment advisors, are listed as a percentage of assets invested 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’s time to change 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 interfaces that can help streamline your experience with managing your employees’ experiences with their retirement funds as well as your own. For example, a plan provider (like Human Interest) that integrates with your payroll provider, automatically updates changes in contribution amounts every time an employee decides to change how much they contribute to their 401(k). This allows employers to ensure better accuracy regarding retirement data without manual coordination with their payroll provider. 

There are also some 401(k) providers that offer automated portfolio rebalancing, which can be especially helpful to employees who may not have the capacity to maintain their assets to match their target portfolio. While automated portfolio rebalancing does not guarantee protection against loss, it can help maintain investment mix and risk.

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, the more resources a plan provider can offer your employees, the better, especially for small businesses. 

5. Credibility 

An indicator that a plan provider has demonstrated that they are a reputable provider is if they have received recognition amongst competitors. Employers should always consider customer reviews, awards, and overall company reputation. It can help serve as a likely predictor of what your experience will be like as a potential customer. 

We highly recommend looking into 401(k) software sites such as G2 and TrustRadius. You can also refer to a plan provider’s Google reviews, or read unbiased opinions from Reddit. 

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.