How to Evaluate 401(k) Plan Providers: Key Priorities for Plan Sponsors

Selecting the right 401(k) plan provider is a critical responsibility for plan sponsors. Today’s sponsors are looking for partners who not only address benefit needs but also excel in technology, compliance, and participant education. Here’s how to organize your RFP process and what to prioritize when evaluating providers.

Technology: The Cornerstone of Participant Experience

Modern plan sponsors expect providers to deliver user-friendly, mobile-accessible platforms that mirror the best consumer experiences, such as those offered by Amazon. Technology is no longer a luxury, it’s a necessity. Providers must continually invest in their platforms to ensure participants enjoy current, comfortable, and intuitive experiences. Mobile platforms are especially important, as they drive engagement and make benefits accessible from any device. Sponsors should request detailed descriptions of provider technology, including mobile access, user experience features, and integration capabilities. Live demonstrations and access to test environments can help sponsors assess usability and functionality firsthand.

Compliance: Staying Ahead of Legislative and Regulatory Changes

Compliance is a central concern for plan sponsors. Providers must offer resources and expertise to help sponsors stay compliant with evolving laws and regulations. The ability to adapt to frequent legal updates, such as annual changes in 401(k) legislation, is essential. Providers should meet current standards for data protection, maintain robust audit controls, and support fiduciary responsibilities. Sponsors should require documentation of audit controls, data security standards, and compliance certifications, as well as examples of how providers have supported other clients through regulatory changes. Including ongoing compliance support and regular reviews in the contract ensures that providers remain accountable.

Education: Empowering Participants and Sponsors

Education resources are crucial for both compliance and participant engagement. Providers should offer tools and resources that educate employees about their benefits, compliance requirements, and plan features. This can include interactive guides, webinars, and digital support channels. Sponsors should assess the provider’s technology for educating participants and supporting compliance, ensuring that education is ongoing and covers both benefits and regulatory updates.

Best Practices for RFP Compliance

To ensure a successful RFP process, sponsors should:

• Clearly define compliance expectations, specifying all relevant legislative, regulatory, and fiduciary requirements.

• Request evidence of compliance capabilities, including documentation and examples of regulatory support.

• Evaluate provider technology and processes for secure data handling and audit trails.

• Include ongoing compliance support and regular reviews in the contract.

• Monitor provider performance through periodic audits and open communication about regulatory changes.

Avoiding Common Pitfalls

Sponsors should avoid underestimating technology needs, neglecting compliance support, and overlooking education requirements. It’s also important to plan for scalability and growth, verify implementation of specific plan provisions (such as Roth options and flexible brokerage accounts), and maintain clear documentation of compliance processes. Regular reviews and audits help ensure ongoing compliance and prevent missed regulatory updates.

Conclusion

By prioritizing technology, compliance, and education, and by following best practices in the RFP process, plan sponsors can select providers who will support their business objectives, protect participant interests, and adapt to the ever-changing retirement plan landscape.