Which 401(k) Providers Are Designed with you in mind?

By Stuart Robertson

Many 401(k) providers can make it pretty turnkey these days to set up a 401(k) and get it up and running, which is great! However, not all 401(k) plans are created equal and most can leave employers with added duties and risk they may not even be aware. These can take time and can put extra fiduciary responsibilities on the employer.

Why Investment Management Is a Very Important Part of Every 401(k) Plan
The investments offered in your 401(k) plan require scrutiny and regular reviews. Every employer is responsible for ensuring their 401(k) is run in the best interest of employees. When it comes to the investment offerings, a regular review of investments is required to provide a diverse, cost-effective line-up that helps minimize the chance of large losses. We all want a line-up that is best situated to grow well over the long-term. The 401(k) regulatory language is there to require a prudent investment approach that includes various fund options covering stock, bonds, cash (asset diversification) to help employees build savings for retirement without taking on undue risks. If an employer does not perform these duties, they can be open to lawsuits and fines. Lawsuits do happen and even to companies you would never imagine. This can be mostly if not completely avoided with the right 401(k) provider that takes on this fiduciary role for you.

Suggestions vs. Fiduciary Role – What Does Your Provider Offer?
Many business owners are busy, are not investment experts, and just want a great fund line-up that enables everyone to build for a secure retirement. You might think that every 401(k) provider will do this for you, when in fact many are only offering investment roster “suggestions” with the full duty and fiduciary liability on the employer to oversee the roster. So, though some 401(k) providers may tout their investments, they will take no responsibility, let alone a fiduciary role, in supporting your plan’s investment roster. Rather, these risks and responsibilities lie squarely on their clients’ shoulders.

How to Know If Your 401(k) Provider Takes on the Investment Management Fiduciary Role
The good news is there are providers (like us) that have an expert investment committee that take on this role and fiduciary duty for you (known as ERISA 3(38) advisors), so this part of your 401(k plan can be turnkey too!

Better yet, these ERISA 3(38) providers typically will have in-depth tools, economic and market data, investment and expense data, investment algorithms, and leverage modern portfolio theory to construct, monitor, and manage the investment offering for your 401(k) plan. This expertise and investment fiduciary oversight can help you and your employees build a bigger nest egg and save you time, energy and cost of managing this internally. At ShareBuilder 401k, every plan receives this high-level of service, and it’s all included in our pricing. To learn more about different roles a provider takes on as well as the duties to manage a 401(k) plan, visit our page on Understanding the Roles of a Fiduciary.

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.