Size of Your 401k - Does it matter?
Guess what? 401(k) plans that supply more money and a larger number of participants to a vendor receive certain benefits that smaller programs don't enjoy. These might be extra services or fewer basis points in administrative costs. However, if you're using a smaller plan, don't fret: What you signed on for initially isn't necessarily what you must live with forever.
A growing plan should be alert for any discounts and services for which it might be eligible once it reaches certain thresholds. Experts say that when companies get to about an average account balance of $30,000 they should start negotiating for a better deal or tell the plan provider that they're looking for another vendor. Investment companies don't want to lose their business.
Most providers designate certain products for specific plans. Some look at the number of participants; others consider the size of the plan portfolio. Still others use average account balance as a gauge. For example, one major fund company divides its clients into five groups based on size and offers different services for each classification, ranging from electronic 401(k) plans for the smallest group to defined benefit administration and consulting services for the largest. Another offers similar services for both small and medium-sized 401(k) plans, but charges different prices to each. As assets rise, an automatic adjustment feature decreases the charge.
The moral: Stay on top of your company's plan and follow up with your provider once the assets reach a certain level. When negotiating for a new or updated contract, make sure that you understand the thresholds and try to have new product enhancements kick in automatically.
If the assets of your company's plan have appreciated over time, call us for a review of the details. We're here to help.