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Technology Driven 401(k) 's: Same Features, Less Cost
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By Jay A. Barker

It’s no secret to small and medium-sized business owners that benefit costs increase each year. In fact according to the Center for Health System Change (HSC), health plan costs in 2003 increased an average of 15%, the largest increase in at least a decade. While health care and other benefits are spiraling upward, few employers are aware that retirement plan costs for smaller businesses have actually been reduced over the last few years.

It’s no secret to small and medium-sized business owners that benefit costs increase each year. In fact according to the Center for Health System Change (HSC), health plan costs in 2003 increased an average of 15%, the largest increase in at least a decade. While health care and other benefits are spiraling upward, few employers are aware that retirement plan costs for smaller businesses have actually been reduced over the last few years.

Why has this gone unnoticed? Partly because the lowest cost full-service plans for small businesses are offered by relatively unknown non-traditional technology driven providers, and partly because these non-traditional providers typically don’t sell through a network of financial advisors or brokers.

Technology Driven 401(k) Providers

So what is a non-traditional technology driven provider and how do they work? Tech-driven providers are companies that have developed Internet based recordkeeping and administration systems specifically for small business plans. Typically the business owner and employees use the Internet to view and manage every aspect of their plan from setup to annual reviews. Common features normally include daily plan valuation, multi-fund family investments, and personalized web-based enrollment.

The major advantages of tech-driven providers all have to do with reduced costs. Cost reductions come from eliminating the selling broker, having less operational layers (middle men) than traditional providers, and dedicated computer systems designed for smaller plans. Actual cost reductions to small businesses can be 50% or more compared to traditional providers.


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