Questions to Ask Potential Retirement Plan Providers
Thinking of changing retirement plan providers? Here are the questions you should ask.
If your employees are planning to live on Social Security alone after they retire, they could be in for a big shock. The average monthly Social Security payment is now $1,335, while some retirees get as little as $650. Most people, especially when health care costs are factored in, would have a hard time living on that amount.
That’s why many employers offer retirement plans as part of their benefit package. Employer-sponsored retirement plans are a great way for employees to save for retirement. According to an AARP study, employees are 15 times more likely to save if they have access to a payroll deduction savings plan at work.
By helping your employees save for their future, a retirement plan can be a valuable tool to recruit and retain employees. Also, employees who have not saved enough to retire often stay on the job longer than is good for the company.
Thinking about changing plan providers or adding a retirement plan to your benefit plan offerings? Here are some questions you might want to ask potential providers:
Q. What Type of Plans Do You Offer?
A. Do some research to determine what type of plan or plans you’d like to implement. If you choose a company that doesn’t offer the options you want, you might find yourself locked into a plan that doesn’t meet your needs.
Here are a few of the most popular group retirement plans:
- According to SHRM’s 2015 Employee Benefits report, 90 percent of employers surveyed offer a traditional 401(k) or similar defined contribution retirement savings plan. With a 401(k) plan, employees choose how much money they want deducted from their salary each month, up to a maximum. Employers often match part of an employee’s contribution up to a certain percentage. Employee contributions are not taxed.
- Contributions to a Roth 401(k) are not tax deductible. However, the employee will not have to pay any taxes on the income when they retire.
- 403(b) plans are similar to 401(k) plans, but are available only to non-profit organizations, such as schools and churches.
- 457 retirement plans are for state and local government employees.
- Pension plans are not as popular as they used to be because they provide a guaranteed retirement income. This makes funding them unpredictable and difficult to budget.
- A Simplified Employee Pension Plan is an IRA plan that allows employers to contribute a set amount to all employees.
- Small employers often offer a Savings Incentive Match Plan for Employees, which is a Simple IRA that lets employers make contributions and match employees’ contributions up to three percent of salary.
Q. What Size Company Do You Usually Work With?
A. It’s best to work with a plan provider that has experience with companies your size. Large companies usually need more comprehensive plans — an option that many small companies might find cost-prohibitive.
Q. What Size Company Do You Usually Work With?
A. It’s best to work with a plan provider that has experience with companies your size. Large companies usually need more comprehensive plans — an option that many small companies might find cost-prohibitive.
Q. Whose Products Do You Sell?
A. If you work with a provider that sells their own retirement plans, they may only recommend options that are to their benefit. An independent investment adviser can take an objective look at all the available offerings and select the plans that will work best for you.
Q. Will You Provide an Itemized List of Costs?
A. Most providers charge administration fees, but some include other charges, such as investment fees or individual service fees when employees take out a loan. It’s best to know upfront what you’ll have to pay.
Q. Who Is the Appointed Fiduciary?
A. An appointed fiduciary is the person or group responsible for upholding the principals of the Employee Retirement Income Security Act (ERISA). They oversee the legal, ethical and financial decisions and record keeping related to your investments. Some providers appoint a fiduciary, while others expect you or someone in your company to handle these tasks.
Q. What Type of Educational Support Will You Provide My Employees?
A. Employees who understand their plan options are more likely to contribute to the plan. Find a provider who offers group or individual training sessions to help employees select investment options.
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