WHAT TO LOOK FOR IN A RETIREMENT PROVIDER
WHAT TO LOOK FOR IN A RETIREMENT PROVIDER
Retirement programs are a critical element in designing total compensation program and are critical tools in attracting and recruiting professionals. Retirement plans represent a substantial financial investment for employers-likely among the largest investment an organization can make in its people. Maximizing that investment means working with a provider that's best able to meet your organization's business as well as benefit objectives. As plan sponsors continue to look more critically at their retirement providers, choosing the partners and products that allow sponsors to best achieve plan objectives requires in-depth analysis to ensure a "best" fit not only for organizational goals but also the "best" interests of participants.
Providers should have a demonstrated experience in the retirement plan industry, a solid track record and reputation. Are retirement plans their only business? How long have they been in the business? What is their client retention rate? Do they have experience administering your unique plan features, or with similar workforce demographics or industry specialization/niche capabilities? Ask about the level of experience their teams have-their account loads and turnover. Also remember to ask if there is a formal monitoring process in place for service quality standards.
With retirement plan investing, it's not what you make, but what you keep. Apart from fees charged for administration of the plan itself, there are fees that may be charged in connection with plan investments. Sales charges are basically transaction costs for the buying and selling of shares. These charges may be paid when you invest in a fund (known as a front-end load) or when you sell shares (known as a back-end load, deferred sales charge or redemption fee). A front-end load is deducted up front and, therefore, reduces the amount of your initial investment. A back-end load is determined by how long you keep your investment. There are various types of back-end loads, including some which decrease and eventually disappear over time. A back-end load is paid when the shares are sold (i.e., if you decide to sell a fund share when a back-end load is in effect, you will be charged the load). These fees are typically charged to offset commissions paid to brokers.
Mutual funds also may charge 12b-1 fees, which are ongoing fees
paid out of fund
assets. 12b-1 fees may be used to pay commissions to brokers and other salespersons, to pay for advertising and other costs of promoting the fund to investors and to pay various service providers to a 401(k) plan pursuant to a bundled services arrangement. They are usually between 0.25 percent and 1.00 percent of assets annually.
Management fees are ongoing charges for managing the assets of the investment fund. They are generally stated as a percentage of the amount of assets invested in the fund. Sometimes management fees may be used to cover administrative expenses. Management fees can vary widely, depending on the investment manager and the nature of the investment product.
Surrender and transfer charges are fees an insurance company may charge when an employer terminates a variable annuity contract) before the term of the contract expires. This fee may be imposed if these events occur before the expiration of a stated period and commonly decrease and disappear over time. It is similar to an early withdrawal penalty on a bank certificate of deposit or to a back-end load or redemption fee charged by some mutual funds.
The bottom line-look for funds with low expense ratios and
understand your total
Seek providers who approach plan design as a total retirement
solution, and have the ability to offer defined benefit, defined
contribution and nonqualified plans. An
integrated approach means that all the information you and your employees need is available through a single provider, simplifying information access for you and your staff. Does the provider have a team of in-house retirement benefits experts (ERISA attorneys, actuaries, benefits consultants, investment managers and education specialists) available on a direct access basis? Is this a standard part of the product offering or is there an additional cost for these services?
Because selecting the right retirement plan is so important, we invite you to consult Pentegra Retirement Services. With more than 65 years of experience in serving the retirement plan needs of organizations nationwide, Pentegra delivers distinct advantages.