401(k) Checklist: What to Ask When Evaluating Providers

Transcription

1 401(k) Shopping Checklist: Employee Experience Routine Admin Work Compliance Cost Investment Selection 401(k) Checklist: What to Ask When Evaluating Providers

2 Your Goal Select a 401(k) provider that saves you time, money, and minimizes your compliance liability. Most importantly, partner with an employee-focused 401(k) provider with a track record of helping more employees join and save in the plan leaving you with happier employees and a 401(k) plan that makes your benefits package even more attractive. And as you evaluate providers, talk with someone from our team and check out our platform. We help our customers achieve 88% participation rates and save 8% on average. Why This 401(k) Checklist Will Help: For two reasons: 401(k) providers are regulated by the Department of Labor, IRS, and sometimes the SEC (if you ve hired a registered investment advisor). This alone makes the benefit a complex one. Asking the right questions will help you plan how much work you ll take on internally, and how much you want to delegate to an external partner. Financial service companies are notoriously bad at being transparent about their fees, what work they ll be on the hook for after the contract is signed, and what liability they re really taking off your plate. Knowing what to ask and what you re looking for will empower you and help you select the right 401(k) provider for your company. How This Checklist Works: There are five elements to every 401(k) plan: 1. Employee Experience: Helps employees save for retirement and be more invested at work. 2. Investment Help and Education: Offers low-fee fund options that include index and target date funds. 3. Administrative Work: Completes the day-to-day tasks that come with sponsoring a 401(k) plan. 4. Compliance: Ensures your 401(k) plan meets Department of Labor and IRS requirements. 5. Cost: Keeps fees in the 401(k) plan in check from plan administration to individual investment fees. The quality and management of each are critical to keep your 401(k) house in order. Each of these can be fully delegated or fully managed by you, it s all a matter of how much time and liability you want to take on. And how much expertise you have on the team. And with that, let s jump into the guide! 2 Talk to us! sales@forusall.com

3 EMPLOYEE EXPERIENCE Features and plan support designed to help employees save for retirement and be more invested at work. Can employees easily view and make changes online or on their mobile device? What are your average participation and savings rates of participants in the plan? What communication do you send to employees (example: monthly balance updates, quarterly statements, etc.)? How often will they hear from you (example: monthly, quarterly, annually)? Which delivery methods do you support? (example: direct mail / / text messages) Is there a dedicated customer success team for employees to reach out to? Does your customer success team offer after work hour support? Do you educate employees on how the company match works and how to optimize it? Do you support automatic enrollment? What features do you offer to create an easier/seamless enrollment process (example: one-click enrollment, QuickEnroll)? Can you support automatic annual increases to employee savings rates? 3 Talk to us! sales@forusall.com

4 INVESTMENT HELP AND EDUCATION Gives employees low-fee fund options that include index and target date funds. Does the fund lineup include target date funds? What is the average expense ratio (ForUsAll s is 0.12%)? What is the investment default fund (should be a low-fee, passively managed fund like a Target Date Fund)? Do employees have access to investment advisors? What are their certification levels (example: Series 65, SEC registered)? Does your employee education program meet the Department of Labor s 404(c) education requirement? Do you conduct quarterly investment meetings to update team on portfolio performance and give access to investment committee? Describe your approach to educating our employees. Do you have an advice service? If you offer an advice service, will you act as a co-fiduciary? Do you provide investment advice to my employees or do you provide general investment education? Do you provide advice to employees on: Credit card debt Saving for a home Student loans Outside assets How many 1:1 employee advisory sessions have you conducted over the past 12 months? Of the employees that you met with, how many ultimately increased their savings rate? Of the employees that you met with, how many ultimately changed their portfolios? 4 Talk to us! sales@forusall.com

5 ADMINISTRATIVE WORK Day-to-day administrative tasks that come with sponsoring a 401(k) plan. Do you have payroll integration with my payroll? Will I need to do any work related to changes employees make to their plan (savings rates, rebalancing, enrollment status, etc.)? [Note: with full payroll integration, the answer should be yes.] Do you track employee eligibility or will I need to manually calculate this? Do you review and approve hardship withdrawals? Loans? QDROs? What will my involvement be on that, if any? Do you offer flexible options to add profit sharing and/or a discretionary match? Do you calculate the discretionary match and/or profit sharing contributions for me? Describe all the testing and other administrative work you provide. Are there standard testing or administrative work which you do not normally perform? 5 Talk to us! sales@forusall.com

6 COMPLIANCE WORK Ensures your 401(k) plan meets Department of Labor and IRS requirements. Which IRS filings do you take care of? Do you sign the Form 5500 and are the Named Fiduciary on the plan? Which 3(16) services do you provide? (If they are a 3(16).) Are you a 3(38) fiduciary? Or a 3(21) fiduciary? What responsibility is left on my plate on the investment management side? Do you provide guidance on non-discrimination testing including regular testing to determine whether the plan is heading towards failing the test? How often do you run non-discrimination test checks (weekly, quarterly, annually)? [Note: avoid providers who only run non-discrimination test checks once after September as that may not be enough time to fix the plan.] Do you offer full audit support? What will an audit cost me? How much of a role do you play to help design 401(k) rules (determines employee eligibility, profit sharing, vesting schedule)? Are there any current or pending litigation or administrative actions against your firm? If yes, please describe them. Is there a minimum length of time we must stay with your company for plan administration? Who is responsible and liable for the following plan administrative duties? (You or the 401(k) provider are the two likely options.) Tracking eligibility and sending notices? Reviewing, approving, and documenting loans, hardship withdrawals and QDROs? Signing the Form 5500? 6 Talk to us! sales@forusall.com

7 COST Keeps fees in the 401(k) plan in check from plan administration to individual investment fees. What are the fees for setup? How much do you charge employees including the average fund fee? Rule of thumb is this should be < 0.75% including the fund fee. What is the all-in investment fee that employees pay? Please break down any amount received via revenue sharing agreements (example: sub-ta, 12b-1, etc.) Mutual fund fee: Recordkeeping: TPA: Advisory: Custodial: Total: Can you send a fully itemized list of fees, including: Conversion fee Charges for plan administration Moving assets from one fund to another Cost to amend the plan Cost to terminate the plan Loan, hardship, rollover, distribution fees Other transaction fees Other fees How will you educate employees on the fees in the 401(k) plan? Do you receive any 12b-1 or other compensation from any mutual funds that are or will be contained in our plan? We d love to see if we check all the boxes off your 401(k) checklist. Talk with someone from our team: sales@forusall.com or go to our website. 7 Talk to us! sales@forusall.com