Ten Ways to Evaluate a 401(k) Provider


As a retirement plan sponsor you face a huge burden. You must be responsive to your employees’ savings goals both now and in the future. You must comply with ERISA rules and regulations. You must make smart choices. And, you must keep making those smart choices by periodically evaluating your plan provider.

This burden is heavy and can seem overwhelming. However, don’t despair; there are steps you can take to break down and evaluate your retirement plan provider to ensure the service meets your needs, the needs of your employees, and complies with federal rules and requirements.

Start your analysis by considering the following Ten Ways to Evaluate a 401(k) Provider:

1. Plan participant feedback. Start with your audience. Are your employees happy with the current program? Have they expressed concerns or shared complaints? How might a new provider manage these issues differently?

2. Auto programs. How does your provider manage auto enrollment and auto escalation?

3. Broad investment menu. Do the investment options contain a wide range of asset classes, low cost choices and index funds? Are there any proprietary fund requirements? Are there funds offered by the provider?

4. What about a more proactive ‘managed’ account option? Or solutions that include target date (2020, 2030, etc.) or target risk (low, moderate, high) funds?

5. What can they offer in their enrollment process? How do they measure success?

6. Industry-leading participant education programs, tools and support.

7. The online experience can vary greatly. What do they offer online versus offline? And, what makes the most sense for your employee population?

8. Given the recent regulation surrounding fee disclosure, how easy are their reports – for your obligations as a plan sponsor and for your participants?

9. What other fiduciary support services do they offer? What type of tools to help you prudently build, maintain and monitor an investment policy statement and an education policy statement.

10. Finally, how do their fees stack up? While you don’t have to pick the provider with the lowest fees, consider what the fees include, and whether bundled or unbundled is more advantageous.

This is not an exhaustive list but rather a conversation starter. It’s meant to help you review and highlight the strengths and weaknesses of your current 401(k) provider. The goal of a good 401(k) plan is to provide meaningful retirement income for all plan participants. Make sure your plan provider is helping you make this a positive and rewarding experience.

For more information on how to select and monitor 401(k) service providers, take a look at the Department of Labor (DOL) fact sheet “Tips for Selecting and Monitoring Service Providers for your Employee Benefit Plan.”