Best 401K Providers
There are thousands of providers you can turn to get the best 401k plan. 401k Providers can be insurance companies, mutual fund companies, financial services companies, or third-party administrators. Despite some variations, whether it is fees or investment options, these providers offer very similar 401k plans.
The main distinction is whether a plan provider (or vendor) is billed as a full-service provider, or as an unbundled provider
Full service providers
Full service providers offer the entire range of administrative services and the investments to a plan sponsor. Also referred to as "bundled plan providers," think of full service providers as a one-stop source for a 401k plan.
The majority of small to mid-size businesses turn to full service providers to get a 401k plan
Types of full service providers are mutual fund companies, banks, insurance companies, and third-party administrators (TPAs). These make up the bulk of full service providers, but online services, payroll providers and HR outsourcing firms may also fall into the realm.
Also keep in mind that some full service providers actually outsource to other parties. For example, you may turn to a TPA for a plan and get all of your needs there. But the TPA may outsource to a mutual fund company in order to offer those funds to you.
The advantage of a bundled plan is that you get everything you need from one spot. The big downside is that you don't have many options within the plan. For example, if you go with a mutual fund company, you may have to invest in their funds. With a TPA, you may have a larger variety of investment options from different fund companies, but you still have to stick to what they offer as far as services and fees.
So if your provider has this restriction, needless to say, make sure you are satisfied with the majority of funds that they offer.
Unbundled service providers
You can use a combination of in-house staff and independent service providers to design a 401k plan. For example, you can have an in-house HR professional to handle record keeping, while turning to an outside vendor to handle investment management or compliance testing.
Unbundled plans offer flexibility since the plan is designed on your terms. Unfortunately, the only way to keep administrative costs to a minimum is to work on them in-house. That would require a great deal of resources -- probably another one or two extra salaried employees.
As a small business you'll most likely turn to a vendor that offers a bundled plan. Although they differ in name, insurance companies, TPAs, and banks will offer similar plans at comparable pricing.
Some mutual fund companies will only offer their funds, which reduces flexibility but mutual funds are the most popular investment choice for 401k plans. Mutual fund companies like Fidelity Investment, The Vanguard Group, and Oppenheimer are also popular picks simply because the well-known name can increase participation by employees. Banks usually offer plans tailored towards larger companies.
