Report: How Do Businesses Choose the Right 401(k) Plan and Provider for Their Business?
Table of Contents
Employers report on their best practices for choosing good 401(k) plans and providers.
Employers and employees overwhelmingly agree on the importance of a retirement plan, with about 90% from each group placing a high value on a company-sponsored 401(k). But is the value they want really there?
We asked employers what they think about the quality of their 401(k) plans. While most think there is a better plan available for their employees, many aren't looking for one. We believe it's critical that employees have access to a retirement plan that works for them—in fact, 66% of employees said that they're more likely to stay with an employer with a quality plan.
At Fisher Investments 401(k) Solutions, we've seen firsthand the impact a quality retirement plan can have. With access to key services, like employee education, our clients have seen a 55% increase in employee participation and a 100% increase in employee savings as of Jan. 1, 2019.
With that in mind, we sought out to learn exactly what gaps there are in 401(k) services straight from the source. Employers told us what they look for in a quality 401(k) provider, and shared their best practices for shopping for new plans and service providers.
In this report, find out what employers had to say, with answers to questions such as:
- What 401(k) services are most important to employers?
- Is cost a major factor in selecting a 401(k) provider?
- What role does employee education and financial wellness play in selecting a new 401(k) provider?
- How often do businesses evaluate their 401(k) provider?
Research methodology: Fisher Investments 401(k) Solutions fielded an online survey in between December 11 and December 21, 2018 among 401(k) and 403(b) retirement plan sponsors at small business (5 to 350 employees). The survey aimed to learn what influences the plan sponsor when offering a retirement plan. When conducting this survey, Fisher investments interviewed a total of 500 plan sponsors.
Most employers believe there are better retirement plans for their employees, but few are looking to make a change.
What do small businesses believe about retirement plans?
The majority of small businesses believe there is a better plan available.
We often hear from people responsible for their company’s plan they’re not sure if changing providers will be worth the effort.
Best practice: Re-evaluate your 401(k) service providers at least every three years and compare fees and service to make sure you and your employees are getting the best value. Over time, costs have come down for investments, investment options have grown, and businesses can get more help and support in running their 401(k) plan.
Employers want more help running their 401(k) plan.
Employers prefer to work with reliable providers who make it easy to set up and manage a 401(k) plan.
Employers want more help running their 401(k) plan.
Support is important to employers. 401(k) plans are a great benefit to offer your employees but come with their share of work. Our survey found one of the main benefits of changing 401(k) providers is simplifying the employer’s 401(k) responsibilities. In fact, 91% of respondents said this is main attribute they are looking for in their 401(k) provider.
Businesses value ease of set-up, provider reputation, and cost most of all.
Ease of set up and maintenance: Businesses want to work with providers who make it easy to administer a 401(k) plan. 91% of those surveyed reported that ease of set-up and maintenance was either very or somewhat important.
Reputation of the plan provider: Employers are looking for a 401(k) provider with experience, someone they can trust in. 90% of respondents said this feature was either very or somewhat important.
Competitive Pricing: Not only did 90% of those survey say that competitive pricing was important for different levels of service like self-service, in-person support, and additional option, 24% also said it was the most important factor when choosing a new plan.
Many service providers leave plenty of room for improvement.
There are many influences on employers’ perception of their plan’s value.
High fees for plans are still a source of concern for businesses, but we also have found an increased desire (from the 2016 to the 2018 survey) for help managing the plan and more employee guidance and support. In our prior survey, only 40% of employers said that a lack of employee education was a top reason to look for a new provider, compared to 72% of employers in 2018. See next page for services quality 401(k) providers offer.
What is missing from 401(k) plans?
We asked businesses which services were currently offered by their 401(k) plan provider and the results evidenced there are service gaps they can fill with a new provider.
- Just 38% reported fair and transparent fees.
- Only 30% believe their plan offers a good mix of investment options for different levels of investors.
- Just 28% said they have someone dedicated to their 401(k) plan who can act as a quarterback for all their plan management needs.
- Only 28% have a plan provider willing to meet in-person and one-onone meetings with employees
- Only 22% report their 401(k) plan provider is taking on some of their fiduciary responsibility.
Top Ranked 401(k) Services According to Employers.
Are you getting these from your current provider?
When evaluating your 401(k) adviser, you want to not only compare costs, but also make sure you and your employees are getting the service you're paying for. A quality 401(k) provider will offer a wide range of services, including:
- Setting and monitoring the 401(k) fund lineup
- One-on-one meetings for employees with a financial professional
- Help desk staffed with retirement plan specialists
- Personal and business tax savings
- Fair and transparent fees
- Online self-service for managing your retirement plan
- A mix of investment options for different levels of investors
- A dedicated point of contact for administrative support
- Ongoing employee investment education
- A simplified administrative process
- Tailored retirement plan
- Fiduciary support
- Additional services like payroll support or insurance
Quality retirement plans play a big role in employee job satisfaction.
A comprehensive 401(k) plan can have a significant, positive effect on employees.
Employers know that a 401(k) plan can be beneficial to their business, and employees know they can benefit significantly, too. New to our 2018 survey, we asked employees about the connection between the quality of their employer's 401(k) plan and their job satisfaction.
We asked employers about how a 401(k) plan benefits businesses, and they reported the following:
- Helping employers save for retirement (71%)
- Helping employees meet retirement goals (64%)
- Help businesses with a tax deduction and gain personal tax advantages
- Helpful in giving employees a sense of commitment to the company
- Recruit high quality employees
- Reduce staff turnover
If your 401(k) is falling short in delivering value and service, then you might not be reaping all of these benefits.
The Fisher Investments 401 (k) Solutions Approach
We believe small and mid-sized businesses benefit most from a customized approach to 401(k).
As we reviewed the information employers shared with us about the services that matter most to them and their employees, we saw a common theme arise: Customized support.
We provide every client with a dedicated Retirement Counselor who is focused on learning your business and the unique needs of your employees. First, we work with you to customize the right 401(k) plan for your goals— but our work doesn't end there.
Our Retirement Counselors and 401(k) Specialists offer educational support to your employees to help them make the most of their retirement plan. They partner with you to make managing your plan easier, acting as a single point of contact to guide you through day-today administration. Over time, they'll help you check in on your plan and explore options to continue adjusting and enhancing your plan.
At the end of the day, as we've learned from employers just like you, a 401(k) plan is only as good as the benefit it offers—and it's our mission to make it as easy as possible for you to maximize your retirement plan's impact on your employees and your business.
How your dedicated Retirement Counselor makes the difference
Tailor your enrollment day for your workplace culture and employee base, so they get information that is relevant to their life.
Conduct enrollment and ongoing educational meetings, including one-on-one sit-downs with employees to help them understand their options.
A Plan That Performs
Manage the plan conversion process from start to finish, so you can stay plugged in to your business.
Conduct annual plan performance reviews and consult on design enhancements to make sure your 401(k) is working toward your business needs.
Day-to-Day 401(k) Help
Act as a single point of contact for all of your business 401(k) needs— you have one number to call.
Provide administrative support by pre-filling 401(k) paperwork, reminding you of major deadlines, and helping to keep your 401(k) plan in compliance.
About Fisher Investments 401(k) Solutions
Fisher Investments 401(k) Solutions is dedicated to bringing superior retirement plan services to small and mid-sized businesses and their employees. Fisher's unique service offering is built on 40+ years of successful wealth management experience and includes our flexible investing platform with actively-managed funds. Business owners will experience the benefit of ongoing support from a dedicated Retirement Counselor whose focus is making the management of a 401(k) retirement plan easier, while helping employees plan for a comfortable retirement.
Questions? Call us at 844.238.1249
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