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Selecting a Plan Service Provider for Your Plan

Published by Kim Moore on Oct 19, 2020 6:00:00 AM

Here at Summit CPA Group, we conduct audits of over 150 Plans per year. We also discuss plan issues with other Plan Sponsors throughout the year. A question that often comes up is how to select a service provider for your Plan. Often this is the selection of a record-keeper or third party administrator. It may also involve selecting the type of Plan offering which can impact investment selections. There are a lot of choices out there, so you may be wondering how do I chose?

man_sitting_on_laptop_18929 (2)We recommend you do a lot of research first. Start by considering what type of Plan you want to offer and what services you want to provide to your employees. Do you want the offering to be primarily on-line or do you want some personal interaction? Do you want the service provider to encourage participation by holding enrollment sessions or simply provide Plan administration? What types of services do you want to include in the Plan – consider things like participant loans, in-service distributions including hardship withdrawals or a profit share that is determined at the end of the year. These types of transactions can require more processing time and you want to ensure you select a provider that can handle this type of activity. Also, consider if you need an assigned representative to your Plan? This individual can work specifically with you as Plan Administrator to make sure all tasks are completed timely. If you feel comfortable working more on your own by working through assigned tasks given to you via the automated Plan system, this would not be needed.

Also, consider the Plan website offered. How user friendly is it? Does it offer retirement modeling tools to your employees (sometimes this is offered to all employees even if they do not participate in the plan)? What type of data is maintained for your employees review? Also, what services and reporting capability does it offer to you as Plan Sponsor? What investment options are available? If you want to offer a brokerage account in your Plan, not all providers can offer this to you.

An important consideration is the expense charges related to the selection. What fees will you as Plan Sponsor be charged for the administration provided? Just as important, however, what fees will be charged to Plan participants? Look for somewhat hidden fees such as investment management fees or revenue sharing considerations. If you have an investment advisor that works with your company or the Plan, bring them into the discussion to help you evaluate this component as well as the investment lineup offered.

Lastly, consider reviewing the controls provided by the sponsor. You might want to ask for a SOC report for the provider for the most current period and review any testing exceptions. Also, consider asking for references or client reviews of their process. You may want to speak with current customers to discuss the strengths and weaknesses they have experienced.

This is a big decision for you to make as Plan Sponsor and it impacts all of your employees. Don’t rush the process and make sure you do a thorough review.

Retirement plans can be very complex. As an innovative firm Summit CPA specializes in 401(k) audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.

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