Choosing retirement account companies

Things employers need to consider when selecting the right retirement financial services

Written by Meg C.

Retirement account companies manage the retirement accounts offered to your employees. Ensuring that a company has the appropriate retirement financial services firm handling its retirement plans is vital to ensure the stability of your employees' financial futures.

Overview of retirement account companies

There are various types of retirement financial service firms. Some are "one-stop-shops," administering retirement plans and investing employee funds, some are companies who only invest employees' retirement funds, while others serve solely as plan administrators.

What to look for in companies

First, you need to make sure that the investment company understands what services you want the retirement company to provide. Do you have the manpower and expertise to administer retirement plans and ensure that they stay compliant with ERISA and IRS regulations? If not, a third party administrator (TPA) is necessary.

If you know what investment firm you want to use, you can have the investment company itself administer the accounts or choose a TPA.

Second, look for a retirement company that has an easy-to-understand cost structure. Cost is very important to employers of all sizes, but crucial for a small business. Make sure you understand the cost structure of various types of retirement plans offered. Keep in mind that there will be several components to the overall fee charged by a retirement account company.

Midsized and large businesses need to consider cost structures as well, but as the number of participants in your retirement plans increase, the cost per employee will decrease. Small businesses are most likely to feel the pinch of retirement plan costs.

Third, look for retirement account companies that have a good reputation. When you meet with the retirement company to discuss a possible relationship, it's vital that both sides develop mutual trust and respect. If you don’t trust or respect the retirement account company or vice-versa, running the retirement plan will become a nightmare. There are plenty of companies to choose from, so make sure you choose a retirement plan company you can trust.

Ways to compare retirement plan companies

Compare the retirement account company's knowledge of tax rules. Retirement plans have unique tax structures and strict IRS and ERISA regulations. When you choose a retirement financial services firm to handle your retirement plans, make sure the firm understands tax laws and can ensure that the plan stays within specific guidelines. The best place to visit to gain a basic understanding of retirement plan tax laws is the IRS Web site.

Compare plans from the perspective of your employees. Nothing is worse for your employees than to have their money invested somewhere that is inaccessible. Make sure the retirement company you choose can handle employee inquiries about individual retirement accounts.

Compare the financial stability of the retirement plan companies – especially the firms that service the actual investment of the employees' retirement funds. Web sites such as Morningstar, JD Power and Associates, and Standard & Poor's can provide analysis of various investment firms.

Final considerations

Retirement account companies are crucial to the success of your retirement plan offerings. It’s vital that the right retirement financial services are provided to employees so that they can adequately save for their future.

BuyerZone can help you find the right retirement account companies to work with by offering free price quotes from multiple providers in your area.