Switching retirement providers to better meet the needs of your small business and its employees may be a daunting, but ultimately beneficial, experience. While any retirement option should help give employees the opportunity to "retire comfortably," maintaining their current standard of living would require employees to save enough to cover 70-to-90 percent of their pre-retirement income, according to the Department of Labor.
The idea to switch retirement providers typically occurs when a realization strikes: your current provider hasn't given you the full attention and help you need to effectively set up and maintain your plan. Here are the most common reasons why switching retirement providers may make sense for your business.
- Your Current Plan Isn't Flexible
Many business owners that provide retirement benefits choose a traditional 401(k) either because it's the only option their current service provider has offered, or because it's the most common type of account making it seem more familiar. If your current service provider doesn't offer multiple options, or they haven't clearly defined those options, it may be time to move on. Plans and features like a safe harbor 401(k), owner-only 401(k), SIMPLE plans, and profit sharing are all proven options, albeit less well known than a traditional 401(k). The more flexible your retirement programs, the easier it may become to attract and retain talented employees who value retirement savings.
- You Take on Too Much Fiduciary Responsibility
Does your current 401(k) provider offer services to help with the fiduciary responsibility for your plan? Investment selection and management is a hot topic — you may hear terms like “DOL fiduciary rule,” “3(38),” or “3(21)” — all of which are tied to ensuring that investment decisions are made with the best interests of the participants in mind. Many providers offer fiduciary support services to help you and reduce your liability, either through their own advisors or through a third party. If your provider does not, it’s likely time to switch to one that does.
- Your Plan Fees Don’t Match the Value
According to a recent Forbes article, some retirement providers have been charging ancillary fees that may not make sense. As an employer, if you are able to identify these costs for your employee, switching retirement providers may make sense. You could be saving them money in the long run, which would help them meet their retirement goals.
Once you understand whether the fees that you and your employees are paying are competitive, and if your current provider is offering sufficient accountability and flexibility, you may come to the conclusion that your current provider is not providing as much value as you thought. In that case, it may be smart to look for other options. Switching to a new provider doesn't always have to be a challenging experience, either. Paychex offers a simple online consultation that will help you gauge the benefits of switching retirement providers and why Paychex may be the best choice for your small business.