3 key considerations when selecting a 401k retirement plan to improve the small business talent and retention competitive edge

I am sure you have seen the ads challenging your knowledge on how much money you will need for retirement. While probably not a cocktail party topic of conversation it is a top-of-mind issue for Baby Boomers, Gen-Xer’s and before we know it,

Millennials will start thinking about it as well.

Net, with the future of Social Security being uncertain at best, more and more people are looking into company sponsored retirement plans as a critical element in their financial planning.

While this an area that small and medium business have not prioritized in the past, recent trends show that it has become an important benefit that could help differentiate you as an employer, thus being able to secure the best talent for your company.

One of the perks of being a marketing consultant is that you get to learn about different industries as you help new clients develop their Brands.

401K Market Analysis

I recently conducted a market analysis into the Defined Contribution (401K) Market, and in the process I was able to learn some insights into this market. Prior to this engagement I thought that it was a simple industry with four or five players and a supporting ecosystem.

In actuality, this simplicity masks complexities that are usually not written about outside specialized media.

Insights for small businesses

This motivated me to share some of my insights in laymen’s terms. In general, it seems that the bigger the provider’s brand, the lower the value for the participants (employees), as administration complexities (brought by size and conflict of interest) take hold. Once you decide that offering a retirement plan is the right thing for your team, you need to ensure that you pick the best possible provider for it.

To help navigate the multiple provider options, we identified three key considerations for an employer to look into when reviewing or selecting a provider.

Ensure that the provider:

1.  Protects your fiduciary responsibility:

Your retirement plan is an important employee benefit and you, as the sponsor (employer), have a fiduciary responsibility to protect the rights and benefits of participants and their beneficiaries.

Failure to meet fiduciary obligations can result in potential added expenses, litigation, and in some cases, prosecution.

You should make sure that your provider acts as independent retirement consulting firm which:

• • Is not compensated by the investment instrument they place the plan in.

• • Is not selling its own proprietary funds.

• • Is not reselling other providers platforms (Independent advisors are not always independent).

As in any other business decision, staying clear of suppliers with existing or potential conflict of interest is a smart course of action.

2.  Offers a clear and easy way to access investment education for your employees.

Ongoing participant education is integral in helping employees reach their retirement goals. The best retirement plan providers have developed a more personalized process as well as a proactive one.

They can educate your employees on how to make the best possible investment choices based on their current life stage (not just upload online brochures and calculators).