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How healthy is your 401(k)?

You really should think about benchmarking your plan. You are probably not compliant with Department of Labor regulations. Don’t feel bad though. The Department of Labor estimates that 75% of plans aren’t compliant. Of course, you don’t want to be substandard. You strive for excellence. Contact us today, and we will help you benchmark your plan. You will discover exactly what is going on in your plan, and how you compare to industry trends.

Great work. You are probably ok with your current plan. However, it is always a solid idea to benchmark your plan. If you want to understand exactly where your plan stands compared to industry trends, contact us today.

  • Do you know what you are paying, bottom line, for your 401(k) plan?

    •   Yes
    •   No
    •   I don’t know
    Correct

    Incorrect Answer

    The Department of Labor requires that fees are “reasonable.” If they aren’t, the DOL will hold you responsible for failing to keep fees reasonable. Often, the DOL requires you make the employees whole with your personal assets. Reasonable fees mean that your fees are in line with other companies with similar size and assets. If you haven’t benchmarked your plan to other companies, you might not be compliant.

  • Are you paying less than 1% per year in total fees (investment advice, fund costs, TPA costs, hidden costs)

    •   Yes
    •   No
    •   I don’t know
    Correct

    Incorrect Answer

    Fees have an enormous impact on your investment success. For every additional 1% in fees, you are surrendering up to 20% of your total return over time. In today’s world, you should not be paying more than 1% for your retirement plan.

  • Who is legally responsible for the investment decisions with your 401(k)?

    •   You (Plan Sponsor)
    •   Your financial advisor
    •   I don’t know
    Correct

    Incorrect Answer

    Actually, it depends. The Department of Labor’s guide entitled “Meeting your Fiduciary Responsibilities” states that “The duty to act prudently is one of a fiduciary’s central responsibilities under ERISA. It requires expertise in a variety of areas, such as investments.” If your current advisor has not indicated in writing that they are acting as a 3(38) Fiduciary on the plan, then you are personally liable.

  • Is your current advisor acting as a 3(38) advisor?

    •   Yes
    •   No
    •   I don’t know
    Correct

    Incorrect Answer

    Many business owners assume their broker or advisor has the responsibility to ensure the 401(k) plan is in compliance, but unless you have a signed 3(38) contract then you are responsible for the plan’s investment choices and costs.

  • Do you have a formal Investment Policy Statement and do you conduct regular meetings to evaluate your investments?

    •   Yes
    •   No
    •   I don’t know
    Correct

    Incorrect Answer

    Most business owners take a “set it and forget it” attitude to their 401(k) plan. They have a to-do list as long as their arm so looking at investments isn’t a top priority. Further, they assume their broker or advisor has their back. The DOL not only looks at your current plan, but the DOL wants to see a process where you are reviewing your plan to ensure the investment offerings are reasonable.

  • Do your employees receive education at least twice a year regarding the plan and their finances?

    •   Yes
    •   No
    •   I don’t know
    Correct

    Incorrect Answer

    If you are like most employers, you set up a 401(k) to help your employees. Providing ongoing education not only helps your employees, it reduces your fiduciary liability.

  • Do you benchmark your 401(k) plan every year to industry trends and other companies your size?

    •   Yes
    •   No
    •   I don’t know
    Correct

    Incorrect Answer

    The DOL requires fiduciaries to monitor their plan in a consistent, documented process. Doing an annual benchmark helps ensure compliance. If you haven’t compared your plan to the industry trends in a while, you may want to do so…soon.