Comparing costs: All 401(k) providers are not created equal
Just as your business wouldn't choose vital business components based on cost alone, nor should you choose a retirement plan provider based on costs alone.
Understanding how plan providers stack up against each other, as well as the value each brings to your business, requires looking at more than just the bottom line.
Typically, the largest differentiator among provider services and costs is the level of fiduciary services they will offer you.
A fiduciary is an individual in whom another has placed the utmost trust and confidence to manage and protect property or money. Since you, as the owner, are always a fiduciary of your company’s retirement plan, you need to ask yourself, “How comfortable am I in taking on that task by myself, while simultaneously running my business?”
Any retirement plan provider can help you create a plan and suggest a menu of investments from which you can choose. However, only a plan provider that offers trustee and fiduciary services can assume responsibility for the plan’s investment menu and on-going monitoring, help to ensure regulatory compliance of the plan, and assist in audits.
Other features that can set plan providers apart include the level of personal assistance they are willing to provide employees, the level of assistance they provide in legal and technical matters, and the amount and quality of employee education they provide.
So, when you compare retirement plan providers, be sure you compare all the specific services that each provider brings to the table.
After you have done your due diligence by comparing the services and value each provider would bring to your business and your employees, you can then compare fees more accurately.
Keep in mind that a potential plan provider that is open and transparent regarding its fees may not necessarily be more expensive than a less transparent provider.
If you notice providers with similar services yet vastly different fee structures, ask as many questions as you need to determine the reasons for the price differences before making a final decision.
In the end, the most important question for you to ask yourself is, “Is it worth the upfront savings to go it alone on fiduciary matters, or will I invest in a dedicated team of experts to assist me throughout the life of my company’s retirement plan?”
Karen Degenhart, MBA, RPA, is Vice President and Employee Benefits Officer for F&M Trust, located in Camp Hill. She helps business owners design, implement, and manage their personal and company retirement plans, including investment management, fiduciary oversight, and employee education.