Just like anything, there are a number of ways to start a conversation around 401k plans. It all starts with asking great questions – and I prefer open-ended ones.
This brief article is to meant to help you focus on a few talking points that we found generate the most bang-for-the-buck, as it relates to your plan. Really this applies more towards our broker/advisor partners and plan sponsors directly for whom may have existing relationships with TPA firms, but have not gotten good consultation, like we’re hoping to share herein.
So, how do we begin? I’d say that most conversations in the retirement world tend to focus around P.R.I.C.E., as an acronym.
P – Plan Design. It’s perfect that this starts our list, as proper design trumps all else! As a TPA, where our firm crafts plan documents to be not only compliant but also efficient, we believe Plan Design is the key for all retirement plan discussions. Is the plan you have efficient and optimized? Is the plan goal for recruiting or retention? Perhaps it’s meant as a incentive program for a group of employees? Do you know you can ‘carve-benefits’ for and away groups of staff? Perhaps consider adding on a richer “top-hat” (defined benefit) plan over your current 401k? What does the group demographics and participation look like? Do you know about auto enrollment, auto escalation and/or plan reset? How can we help you ‘crush-it’ with plan design?
R – Recordkeeping and Administration. The Record-keeper of the plan is often overlooked, but is a critically important member of the retirement program as a whole. Think about it, when they do their job the plan data is accurate and reports are timely (and they are supposed to be)… but you do not get credit for doing the things you are supposed to do! However, a great recordkeeping partner can also bring significant technological enhancements and time savings to a plan sponsor – from payroll feeds to online employee self-service, and a host of other items. It’s important to know what is available. How old is your plan/how long has it been with the current provider? Think about it; technology, which is the base of the recordkeeping world, changes and improves so frequently that if your plan is 3-4 years old it’s like working with an outdated cell-phone! Do you with a local TPA? Perhaps you should – the impact for your plan can be huge, and often the plan savings can be as well!
I – Investments. This is like the iceberg analogy I’m so fond of… Investments are just the tip of the iceberg; it’s what participants and many brokers/plan sponsors focus on, yet it’s not the most important. Naturally, this does not mean that you should not pay it any mind. Just like the iceberg has 90% of the mass (or issues) lying under the surface… so too can overpriced or underperforming (or both) investments hide bigger issues with your plan. Perhaps you don’t have an Investment Policy Statement for reviewing, selecting or removing funds… or if you have one, perhaps your not following it? Do you have solid target-date offerings? Are you covering all the applicable fund boxes? Do you have or know about 3(21) or 3(38) services to add to your plan?
C – Compliance. Fiduciary is a recent buzzword that has taken on new meaning lately. Compliance is ultimately the plan sponsor’s responsibility. Although it can be shared and outsourced, which may be quite prudent, understand that in doing so is a fiduciary act? Do you know all the compliance requirements to maintain good fiduciary checks and balances? If you outsource any tasks, like payroll remittance and/or loan approval, are you indemnified for doing so? Are you sure? Know you are personally liable, so you better be 100%. On a more day-to-day level, what about your financial advisor? Are they local, knowledgeable, available and helpful? What are their credentials and what do they do for you and your staff?
E – Education. This applies to you as a plan sponsor AND the employees in your plan. May cover many of the fiduciary items above, as well as the ongoing education and enrollment of your plan. For employees, this typically culminates in an enrollment meeting, but really this should not be a once in a while (or year) task. What’s your Education Policy Statement “EPS”? Do you have one? Are you able to leverage any record-keeper or broker tech to help with more participant facing touchpoints? If you were to ask the staff about the plan, do they know about it, do they value it?? If not, now they can!
Many retirement plans and brokers we’ve met over our years take for granted that what they have is all there is. Trust me, it’s a big, big world of options out there. If working with professionals, such as my team at MAGII Pension can help you in anyway, we would be honored to do so. Keep in mind that for any plan matters, we need not have to move your plan, often we take over your current plan and work with the recordkeeper and broker/advisor of your choice.
Until next time, continued health and success and thanks for reading!