401K Confidence: Plan to Prosper
Don’t Fear the “F” Word
A 401k Plan is a valuable employee benefit and a strong talent retention tool for your business; however, it also places “fiduciary” responsibilities on your shoulders. We educate you on ERISA’s five key mandates and your related fiduciary duties, so you can be comfortable with your compliance. We help you implement prudent processes to protect your interests, reduce risk, and limit liability.
Risk: You can’t eliminate your fiduciary responsibility to interpret, select, and monitor Plan activity; however, you can choose providers with transparent business practices that mitigate your risks. Take care to understand the difference between slick marketing that is short on legal and economic substance. A 3 (21) Adviser shares risk with you, but you still have the ultimate investment authority (and liability); whereas a 3 (38) Manager is ERISA’s highest standard of care and removes your investment liability.
Three Questions to Ask Your Plan Provider/Adviser
- Are you serving as a 3 (38) fiduciary?
- Will you accept the 3 (38) status in writing with a clear written description of fees and services covered? If not, why not?
- Which fiduciary duties do I, as Plan Sponsor, still retain
Does your adviser offer you 3 (38) protection in a clear, written agreement?
Participant Education: Retirement readiness is important to all participants. If not properly funded and invested, many 401k plans will fail to provide needed retirement funds. Our education programs review important, practical investment concepts like appropriate savings levels, risk, return, dollar cost averaging, compound interest, and accumulation and distribution. We also can offer individual advice to plan participants.
Benchmarking Fees & Expenses: ERISA mandates that you understand all 401k plan costs to ensure they meet the “reasonable” standard.
Plan Contributions: If your top priority is to save more and reduce taxes for yourself and/or highly compensated employees, while minimizing employee contribution costs, 401k plan design becomes very important. Once we have collected your employee census data we can run the numbers, assess your options, and see where we can improve your results. We partner with TPAs and actuaries whose specialized expertise can maximize your benefits and remain compliant with the IRS.
Efficient Plan Design to Maximize Your Benefits
The hypothetical examples in the table below shows why understanding your options is vital to help you as the owner to maximize your benefits. The example evaluates a small company using different plan types and combinations to find which provides the most efficient mix of contribution levels, tax savings, and employee contribution costs. Your savings and tax benefits will depend on your compensation and age as well as your employee demographics.
If you’re behind on your retirement savings or would like to supercharge your tax and savings, cash balance plans or another type of plan design may be exaclty what you need.
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Last month we reviewed some differences and similarities between 401ks and IRAs that can create cost and confusion. Yet another difference you and your employees should know about is beneficiary designations. This applies to 401ks, IRAs, insurance policies, annuities,...read more
Retirement plan accounts such as IRAs, qualified pension, or 401k Plans, all enable participants to grow money tax deferred. Yet distribution options, protection from creditors, beneficiary designations, and contribution limits can vary significantly by Plan type. The...read more