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.
Plan Design: Specialized TPAs and actuaries can tailor your Plan to find 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 exactly what you need.
Options to Choose, Not Choose, or Defer to a Later Date Not all plans include the so-called “In plan conversions” detailed below, which allow existing pre-tax 401K dollars to be converted to after-tax ROTH 401k dollars. They can be a good way to build tax-free income...
Social Security – Fix or Fumble the Political Football The Center for Retirement Research at Boston College reports that the Social Security “trust fund” is due to deplete its surplus reserves by 2035. Contrary to sensationalized reports, the authors illustrate the...
The owners and plan trustees wanted to increase plan participation rates, especially with the younger, lower earning employees who make up most of the workforce. Due to the nature of the business (120 employees in multiple locations) the broker from a large...