8 Questions Entrepreneurs Should Ask When Choosing a 401k

Unemployment may be high post-COVID-19, but the most talented workers will always be able to find jobs. In fact, they might be more picky than ever—and they were picky well before the coronavirus affected the market.

According to Glassdoor, job seekers ranked benefits packages second only to salary when it came to evaluating potential employers. As an employer and entrepreneur setting up your company, those are important points to remember. And benefits don’t just include health care insurance options. They also extend to retirement savings account perks including different types of 401k plans.

Though you don’t have to offer a small business 401k to your employees, it’s an attractive touch that could win you the loyalty of a long-term worker with crazy-impressive skills. However, deciding on which 401k will be right for your company requires that you ask some upfront questions.

Below are eight pertinent inquiries to make to a 401k plan provider. As with all contractors, make sure you explore around three to five providers so you can make a decent comparison.

1. Do you provide any type of education for employees?

Many workers are unsure how to make the most of a 401k, or even know what a 401k can do for them. Some haven’t any clue how 401k packages work, especially Generation Z employees just entering the workforce. 

Although you are under no obligation to help them understand the value of a 401k plan, you’ll differentiate your company as progressive and empathetic if you can explain to job candidates that you offer assistance related to smart personal finance choices. And it’s even better if that advice comes straight from the 401k provider either as in-person workshops or through digital information portals.

2. What will the total costs be for me and my company?

A 401k provider has to make money, too, and that means charging extra fees to offset the convenience of offering robust plans. As an entrepreneur, you’ll want to know what those fees are going to look like realistically. Otherwise, you could be surprised when you get hit with charges that you never budgeted for. 

You should also disclose any fees that employees will pay, as well as information on subjects like when workers are fully vested and whether they can withdraw from their 401k plans early in case of emergencies.

3. Is your 401k plan workable for a small business or upstart company?

Chances are strong that you’re going to fall into the small business category, especially if you’re operating a startup. Entrepreneurs frequently like to choose SIMPLE 401ks because they’re the easiest and most affordable to maintain for entities that employ fear than 100 workers. Still, don’t assume that the 401k you’re considering falls into this category. Be prepared to ask the question directly.

4. Will employees have digital access to their 401k accounts?

People are accustomed to being able to control their lives digitally and virtually. And that extends to being able to evaluate and see their 401k plans. If a provider doesn’t offer this type of customer service, you may want to choose a counterpart that does. Your team members shouldn’t have to be in the dark as to their 401k accounts—and you probably don’t want them coming to you regularly every time they have a concern.

5. What are the unusual or unique features of your 401k plan, if any?

Every 401k plan offers different features, add-ons, and unique opportunities. Nevertheless, not all will be important to your job applicants or employees. As an example, having a Roth 401k may be attractive to workers who want tax-deferment later rather than now. 

How best can you compare different 401ks and their features? The easiest method is to create a spreadsheet so you can check out the differences between 401ks at a glance. Seeing everything in one document can assist you in making your final pick.

6. Do you recommend matching employees’ 401k contributions?

Don’t be surprised if the answer to this question is always going to be “yes”. Matches aren’t just good for the 401k provider and team member. They can also be good for your company at tax time. However, you’ll want to crunch some numbers to make sure that you’re getting advantages from matching your employees’ contributions up to a certain percentage or amount.

7. How soon do you recommend employees join a 401k plan?

Because employers have to pay for their workers to gain access to 401k plans, they may make new hires go through probationary periods. For instance, a hiree may need to wait three months, six months, or even a year before being eligible for the company’s 401k package. Think carefully about waiting periods, though. The longer the runway for 401k eligibility, the less impact it will have on top quality applicants.

8. What is your customer service like?

Employees want and deserve excellent user experiences, particularly when dealing with a 401k provider that’s going to house their money. Make sure you feel comfortable with the type of services your employees will get from any plan you choose. Remember: This isn’t just about your team. It’s about you and your family, too. After all, it’s likely that you’ll be participating in the 401k package as well.

Final Thoughts on 401k Plans and Packages for Entrepreneurial Businesses

Owning a business involves a lot of moving parts. Not only are you worried about revenue, but you need to juggle all the other balls that are tossed your way. If you’re feeling uncomfortable when it comes to finding a solid 401k plan, you can always ask for help.

Many firms and even freelance consultants can assist you for a fee. Plus, they may have insights into other perks that could work for your company. You’ll still have ultimate control and decision making, of course, but you will feel more confident knowing that you relied upon the backing and counsel of experts.