Best retirement plans company: what to look for

Finding the best retirement plans for your employees

Written by Meg C.

There are many components employers must consider when looking at their best retirement plans company options. Here's a look at some of the challenges facing employers – and possible solutions.

Examples of best retirement plans company options

Defined benefit plans have lost popularity recently. These plans specify a benefit an employee will receive at retirement, depending on salary, years of service, and retirement age. These plans are great for employees, as they don't need to contribute any current earnings to reap future benefits. But for employers, it can be costly.

Defined contribution plans are ideal for employers. These plans specify the contribution an employee can expect from the company. A defined contribution plan is also good for employees, as they’re given money to invest for retirement. The downside for employees is that the burden of investing these funds falls on the individual.

Two common forms of defined contribution plans offered are profit-sharing plans and 401(k) plans.

Profit-sharing plans allow an employer to contribute a certain percentage of an employee's salary to the employee's retirement account. The employee will see the contribution directly in their account. The employer can choose how long it takes an employee to vest the funds, helping the company retain workers.

401(k) plans, the most common employee retirement plan, allow employees to save a portion of their salary for retirement. An employer can decide to match the employee's contributions, which gives employees an incentive to save for the future. Like the profit-sharing plans, the employer match will vest.

How the best 401(k) plans work

A 401(k) plan allows an employee to save a certain portion of his or her current salary. These savings are tax-deferred until retirement, meaning employees could get better spending power for their dollars.

The Roth 401(k) taxes employee contributions immediately, providing an employee with tax-free retirement income. Employer contributions and the earnings from employer contributions are still tax-deferred until retirement.

The Roth 401(k) option could be the best plan for younger employees currently in a lower tax bracket than they will be in retirement. A Roth 401(k) plan might be great for those employees who fear future tax increases.

What to look for in 401(k) plans

There are many things to look for in the best 401(k) plans. First, they’ll offer many investment options for employees. A company needs to make sure that the company it ultimately chooses to handle its employees' retirement savings has a vast array of investment options. Many financially savvy employees may desire self-directed accounts instead of investing in various funds.

Second, look for companies with a solid track record. There are many resources available online and through recommendations from friends and colleagues that company directors can leverage to help them determine the quality of the plan they're evaluating.

Finally, the best 401(k) plans will have an easy-to-understand cost structure. The best retirement plan company will have transparent and simple fee schedules.

Ready to connect with multiple employee retirement plan companies? BuyerZone can provide you with free price quotes which will help you determine the best retirement plans company to work with.