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Tips on choosing your first 401(k)

401(k)s for small businessesShopping for your first 401(k) plan need not be intimidating. When putting your company's plan out for bid, the Department of Labor's Pension and Welfare Benefits Administration has these tips:

  • Provide all prospective service providers with complete and identical information about the plan and what you are looking for so that you can make a meaningful comparison. This information includes the number of plan participants and plan assets as of a specified date.
  • Consider the specific services you would like provided. Think about, for example, what information you want sent to you and to the employees; the frequency of those reports; whether you want educational materials and meetings for participants; how often participants can change their investment choices; which services are musts and which are optional, and extra features such as loans, Internet trading and telephone transfers.
  • Make informed decisions in selecting and monitoring your plan's service providers and investments.
  • Fees are just one of several factors you need to consider in your decision-making.
  • All services have costs. Compare all services to be provided with the total cost for each prospective provider.
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  • Consider obtaining estimates from more than one service provider before making your decision.
  • Cheaper is not necessarily better.

Ask each prospective provider to be specific about which services are covered for the estimated fees and which are not. To help in gathering this information and in making equivalent comparisons, you may want to use the same format for each prospective provider. The PWBA offers a standard form on its Web site in PDF, text and RTF formats.

 

-- Posted: Feb. 25, 2000

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Main story: New plans make 401(k)s more available

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