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Where can I find options of lost-cost 401k plans to suggest to my employer?

It's a smaller firm, only 20 employees, and at the moment nothing is offered. I'd like to take specific suggestions to my management team.

Jun 18, 2012 by Matilda from Royalton, WI in  |  Flag
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18 votes
George Cones, JD Level 20

Matilda,

There are much better options for smaller plans than there were just a few years ago.

I would suggest you look for a fee-only advisor, who can hopefully show you how to build a plan using "unbundled" service providers. That means, the record keeper is separate from the custodian, and the advisor is separate from them both.

Depending on the assets in the plan, you may find that you can have a plan with significant number of choices, using a combination of index ETF's and/or best-in-class active managers.

Comment   |  Flag   |  Jun 18, 2012 from Wilmington, DE

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Don Level 19

I agree with George that a fee-only advisor in your area is a great place to start. Look for someone who focuses on small company retirement plans. This individual should also help you decide whether a 401(k) or SIMPLE IRA is right for your company.

In the 401(k) space, I have evaluated a number of platforms and the most friendly to start-up plan budgets that still provide quality investment menus and service include Employee Fiduciary, Sharebuilder 401(k), TD Ameritrade, 401k-Direct, and T. Rowe Price. I'm sure this isn't an exhaustive list but browsing these sites may help you understand the marketplace better and learn what constitutes a good platform.

Comment   |  Flag   |  Jun 18, 2012 from Middlebury, VT

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Hi Matilda, I agree with George; and, I'd be very cautious about using your payroll provider simply because they're already doing payroll. For them, plan governance is simply a sideline... you might like to read the comments of an ERISA attorney who's a nineteen-year veteran in this area: http://www.jdsupra.com/post/documentViewer.aspx?fid=8133b317-3c7c-4533-bdef-649ad971b08e

When your employer sets up a plan, it's a fiduciary act; so, there's more to it than simply "shopping" for a commodity. Good luck!

Comment   |  Flag   |  Jun 18, 2012 from Moorpark, CA

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Often times, companies like Paychex and ADP will offer low cost plans almost as loss leaders, because they want a shot of getting ALL of a companies benefits. Our firm uses Paychex/Eplan as they offer a very strong mutual fund platform for us to build for our participants. Paychex acts as the custodian/administrator while our firms acts as the advisor. We educate the participants, do enrollment meetings and build/monitor the mutual fund portfolios for our clients.

I would look at the firm you are using for payroll first. If they offer a strong 401K platform, the integration can be very efficient and effective.

Comment   |  Flag   |  Jun 18, 2012 from Orlando, FL

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Hopefully this will fix Jim’s link. http://www.jdsupra.com/post/documentViewer Here is my two cents to look for in a Retirement Plan, Fee-only, independent Registered Investment Advisors that serve as both ERISA 3(21) and 3(38) advisors, taking some liability off of the plan sponsor. Advisor Managed Portfolios that give participants the ability to turn the management of their 401(k) assets over to expert advisors. Independent providers who are free from conflicts of interest normally found in 401(k) plans. No hidden fees or fee-sharing arrangements, giving you full transparency of all plan costs.

Get an independent ERISA Fiduciary to review your plan An independent reviewer may see something that has been overlooked by others, which could save you and your employees’ years of additional work and thousands in lost retirement savings.

5 Core Principles of an independent ERISA Fiduciary Put the client’s best interests first. Act with prudence, that is, with the skill, care, diligence and good judgment of a professional. Do not mislead clients – provide full and fair disclosure of all-important facts. Avoid conflicts of interest. Fully disclose and fairly manage, in the client’s favor, unavoidable conflicts.

Comment   |  Flag   |  Jun 18, 2012 from Lititz, PA

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Michael T. Prus Level 11

Matilda,

While I agree with many of the above posters about starting with a local RIA, keep in mind not all RIA's are created equal. Some only dabble in 401(k) plans and may not understand them as well as they maybe should. Additionally, just because someone is an RIA does not necessarily mean they are reasonably priced. Compare and contrast costs and services to determine which is most appropriate and provides the services you need. Also ask them about their investment selection and replacement process. This is important because many tout having only top quartile funds, which leads to frequent manager changes and often 'selling' of managers (funds) when they under-perform (selling low) and replacing them with ones that have recently out-performed (buying high).

Mike

Comment   |  Flag   |  Oct 30, 2012 from White Lake, MI

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