Talk about adding insult to injury: Retirement plans took a beating last year, and now plan providers are increasing management fees.
As a result, more employers — especially small ones — are considering dropping retirement benefits altogether.
But a drastic move like that is almost sure to hurt morale and might even cause some employees to jump ship.
How to combat cost increases
To retain retirement plans and continue to allow employees to benefit from a continuing economic upswing, here are four ways to stave off rising plan costs:
1. Revisit and compare. Determine exactly how much your company is paying (in administrative and management fees, etc.), as well as how the plan has performed, and then do a comparison of the competition.
While most plans struggled last year, some providers had better results than others. A benefits consultant or outside advisor can be extremely helpful in helping you pick the best plan for your company.
2. Renegotiate. The market has affected everyone, and the last thing plan providers want is to lose valuable customers.
As a result, many providers may be open to renegotiating rates.
Tip: To get a better deal, consider introducing bids from other providers in your renegotiation process.
3. Look to small business-friendly providers. Certain plan providers base fees on factors like the different services they offer and the number of plan participants a company has — no matter what the assets in the plan are.
Small companies, especially those with lots of assets, can benefit from this type of fee structure.
4. Bundle services. If your current plan provider is planning a major price hike, then you may have luck brokering a deal with one of your other service providers.
Example: When a NY-based company was hit with a $3,000 fee to reinstate its 401(k), it changed plan providers. The company went with its payroll provider, nabbing a discount that saved it around $500 a year.