Tips for Evaluating a Small Business Retirement Funds Services Provider
A small business that sponsors a retirement plan for its employees is tasked with selecting a competent retirement funds management service provider. Selecting a competent provider can seem quite a challenge at first sight. However, this is not the case.
When you understand the specific services that make up the type of retirement plan you are interested in, choosing the right provider becomes easier. To determine whether a particular provider is good for you, it's important to apply various benchmarks to the services they provider to measure their value. From there, choose a company based on the value of its services.
Commodity vs. Value-Added Services
Some safe harbor plans services are considered as a commodity service. The providers in the market are competent. In most cases, their differentiation is based on price. Some retirement plan management companies may offer other "value added" services that are in line with the needs of individual clients. With such providers, the differentiation is on the value received by the plan rather than price.
Some of the services available in a retirement plan include:
o Custodian - Executes trades or holds plan assets in a trust.
o Recordkeeping - Tracks investments, earnings and contributions on a particular level and directs the custodian to carry out trades.
o Third-Party administration - To complete the section 3 38 of erisa plan document, design and annual compliance forms.
o Investment advice - To make participant investment recommendations or select an investment menu.
Recordkeeping and custody are classified as "commodity" services. Like is the case with any commodity, the most important benchmark for these services is price, given all things equal. When searching for record keeper or custodian services providers, it will be better for your business and employees if you find a cheap one.
While accuracy and execution speed are important, most providers are pretty fast in execution. On the other hand, providers with accuracy issues get out of business due to lawsuits or trade error reimbursements. Check out the list of small business ideas in http://www.ehow.com/list_6458751_list-small-business-ideas.html.
Third-Party administration and investment advice are "value-added" services. The impact of a retirement plan to your business or employees can be affected by the expertise of the service provider. Therefore, if the marginal cost of a more expensive retirement plan management company is less than the value you will receive, it can make sense to pay more for the services.
There are two simple steps you can follow to evaluate the value of investment advice and Third-Party administration. These are: determine a benchmark for each service rather than the provider as a whole, and then evaluate the services against the benchmark.