How to Choose the Best 401(k) Provider for Your Business

By Stuart Robertson

Whether you’re shopping for your company's first 401(k) or comparing your existing plan against other providers, there are some important items to consider to make sure you have the best plan for your business. Here are eight attributes that’ll help determine if you will receive (or are receiving) the right value and services from your 401(k) plan provider.

  1. Low-cost, transparent pricing that automatically lowers business and participants costs as the plan money grows – no contracts or contribution minimums required. Some providers will provide you pricing but won’t revisit unless you’re pushing for it.
  2. Easy, online setup process (something you could even do over lunch), and the plan is supported on-going to help manage payroll and simplify year-end requirements. You may be surprised how many providers are still paper based to setup and require a bit of back and forth to get your plan up and running.
  3. Keeps all-in participant expenses below 1% (inclusive of fund expenses, recordkeeping, and custodial services), so more of your money stays invested in the markets. Often, small businesses just starting a plan are subject to fund options with expense ratios over 1%.
  4. Takes a long-term, diversified, and preferably an index-based fund approach for the investment line-up. Index funds typically have lower expenses than actively managed funds, and historically* have been tough to beat. Index fund expense ratios are typically under 0.50% and many major ones are under 0.10%.
  5. Provides a governing Investment Committee that manages your investment roster and model portfolios. This brings expertise and deep analysis to the process, saves you time and energy, and protects the employer and plan sponsors from investment fiduciary risks. This is called an ERISA 3(38) advisor.
  6. Provides robust employee retirement and investment guidance tools, materials, training and support to answer employee questions quickly and help them get on track to reach their goals.
  7. Offers flexible features to employees, such as the ability to request a loan from the plan or make Roth contributions, as well as a high level of service including a care center that picks up the phone to assist (not to some voice mail during business hours).
  8. Fits your current business needs and has options that can grow as your company evolves. Whether you need an Individual 401(k), a plan that vests over time for your employees, or want to consider advanced profit sharing options, you’ll want to ensure your provider can meet your needs today and tomorrow.

These considerations will help ensure you have a low-cost, high service plan that serves both you and your employees now and in the future.

*Historical performance is no guarantee of future result. The investment return and principal value will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. You should carefully consider information contained in a fund's prospectus, including investment objectives, risks, charges and expenses. Please read the prospectus carefully before investing.

Meet the Author

Our low-cost 401k plans are easy to setup online and are supported by our 401k advisors and specialists. ShareBuilder 401k serves small business and medium-sized companies, as well as the self-employed. We offer Roth 401k, Safe Harbor 401k, Traditional 401k, and Solo 401k options. Your 401k plan is paired with investment management expertise and employee education to help you save more.