Considering a New Service Provider for Your 401k Plan? Here are some key questions to ask:
Choosing a new retirement plan is a massive undertaking. When you are moving millions of dollars in a retirement plan, it is important to consider the many facets of this complex relationship in both the long and short term.
- About the organization: You’re not just signing on with a provider, you’re committing to an entire organization
- Platform: Looking deeper into how they’ve built their systems may save you heart ache in the future.
- Fees and Investments: Understanding the relationship between investment choices and fees can save you sticker shock.
- Integration: You’re not just relying on the provider; you’re relying on everyone they work with to provide smooth operations.
- Security: No one will tell you they don’t take security seriously, but there are minimum levels of protection you should expect
ABOUT THE ORGANIZATION
What is their primary business?
Knowing a business’ primary source of revenue can tell you a lot about how they’ll prioritize and value your business. You may see businesses with focuses across the industry:
- Asset management firm
- Insurance company
- Bank
- Record keeper
What’s their history in the industry?
Looking at things like market share, or number of plans can give insight into how stable the organization is and the depth of their service options.
How well known is the organization?
You need to “sell” employees on the value of your benefits. Is it important to you that employees instantly recognize their provider?
PLATFORM
- Who owns their recordkeeping platform?
- Recordkeepers may use a third party to manage their platform, creating a dependency on that company for necessary updates.
- How quickly can the organization update their systems to meet the requirements for frequent legislative or regulatory changes?
- How many platforms do they maintain?
- Multiple platforms – whether for different sized plans, or legacy platforms they have acquired through mergers – can cause disruption to service and take away from focusing on the best user experience.
- How has their platform innovated / transformed in recent years, and what are upcoming product enhancements?
- The industry changes constantly, whether it’s required changes or even just new benefits options. The system the provider uses needs to change with it.
FEES AND INVESTMENTS
- Is there revenue sharing with third party administrators?
- Follow the money. Understanding where fees go can tell you more about how a provider is structured, what they value and who they rely on for customer support.
- Do they use block pricing increases? Are fees locked in for a period?
- Block pricing puts all clients together in a bucket and universally raises fees, rather than assessing fees on a client-by-client basis.
- What fees existing beyond basis point evaluations?
- Basis points, the fees paid based on investments, are a good starting point to determine costs but take the time to see what fees may trigger based on plan needs to avoid surprises.
- How is float handled?
- When participants contribute to or withdraw funds it is industry practice to hold these funds in an omnibus account until the transactions are complete. The earnings, or “float” from those short-term holdings can either be kept by the provider or returned to the plan sponsor.
- Do they put fees at risk over performance standards?
- If a provider is willing to tie fees to their performance, they obviously have more at risk in not delivering on your high standards.
- How does pricing change based on investment options?
- Investment fees can be difficult to compare across providers. Because fees are often tied to the investments you choose, it can be difficult to compare apples to apples. Spend some time and map out all of the options and their associated fees before making a choice.
- Are managed accounts required for employees?
- Recordkeepers may force employees to enroll in their managed account options to drive revenue. That may be appropriate but should be addressed prior to starting a relationship.
- How open is the open architecture?
- Some providers offer “open” architecture, but only for certain categories of funds. For example, they may require a proprietary stable value fund to cover their costs.
INTEGRATION
- Beyond basic retirement, what other employee benefits do they offer?
- If additional resources are offered, are they outsourced?
- Understand where your services will come from. You may sign with Provider X, but if they are contracting out portions of the work, then you are really relying on many different third parties to provide a consistent, accurate experience to you and your employees. It’s the difference between a provider being truly integrated vs. merely aggregating multiple services across a network of vendors.
- What is the administrative experience like for plans with multiple products?
- Is there a single dashboard or multiple ports to run reporting or act?
- Do you have a single contact for all services or is there a list of potential names to call for each service?
- What controls are in place to monitor and regulate vendor service levels?
- Like any subcontractor, if your provider relies on third party vendors, you may be at their mercy when issues arise. Knowing how your provider manages those service levels is Important.
- What backup plan is in place if outsourced vendors leave the industry?
- Turnover is inevitable, especially with so many players hoping to get into the benefits market.
- How do they add new services? What was the last service they added and who provides it?
- Walking through how a new service is added can clarify how the provider operates. What do they prioritize? What is their vetting process?
SECURITY
- How do they invest in cybersecurity?
- Everyone will tell you they are secure, but cyber security is a constant battle requiring time and money spent to fight the latest attackers.
- How much of overall revenue is focused on security? How many cyber experts do they employ?
- What outside certifications have they achieved?
- Be wary of phrases like “ISO equivalent” which may be misleading.
- Outside certifications like ISO standards are cumbersome, highly sought after ratings earned from independent national organizations. Push to see the outside verification of their standards.
- What are the security credentials for each third-party vendor?
- Confirm third party vendors also meet security standards.
- What is the process to make a claim against their customer protection guarantee?
- Not all protection guarantees are the same. If an employee needs to jump through unrealistic hoops just to qualify, then there is not much protection at all.
- Does the organization actively update their security technology?
- How quickly can they implement the latest technology? Are they investing in the latest innovations?
DON’T SETTLE FOR SURFACE-LEVEL PROMISES
Choosing a retirement plan provider is more than checking boxes on a spreadsheet — it’s about protecting your employees, your business, and your peace of mind. The right partner should offer clarity, transparency, and alignment with your long-term goals — not just flashy presentations.
At PlanSimple, we help businesses dig deeper and make confident, informed decisions. Whether you’re evaluating your current provider or exploring new options, our team is here to guide you every step of the way.
👉 Let’s talk about your next RFP before it hits your desk. Click here to schedule a no-pressure consultation today.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
PlanSimple Financial Partners, LLC is a registered investment adviser located in New Orleans, Louisiana. PlanSimple Financial Partners, LLC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Investment Advisory Services are offered through PlanSimple Financial Partners, LLC, a registered investment adviser.