Five signs that your business is outgrowing its retirement plan
Congratulations! Thanks to your company’s retirement plan, you and your employees are accumulating tax deferred savings and increasing the odds of a successful retirement for all of you.
But do you have the nagging suspicion that your company may have outgrown the plan you established three, five, or ten years ago? Technology and a renewed focus on small business by a new generation of providers are making it easier and cheaper to offer a retirement savings vehicle, one that engages employees to ensure their participation. Much like a new car seems loaded with new technology compared to that 10-year old model, you may be surprised by what today’s generation of 401(k) providers have to offer.
Here are five signs your business is outgrowing its 401(k) plan:
1. Your costs have not come down.
Over the past several years 401(k) fund fees have come down 30%. But not every company is seeing their costs decrease.
You may also be surprised at how the investment environment has changed in just a few years. Not only are many cheap, passive investment options getting cheaper, but there is also pressure on active managers to cut their fees as well. If your mutual fund fees are higher than 0.70%, you are probably paying more than you should. ForUsAll typically recommends a low-cost, passively managed fund lineup that comes in at an average of 0.13%.
2. You and your key employees are spending too much time attending to your 401(k).
Your retirement plan is supposed to be a benefit for your employees and for you as well. But it should not be an administrative nightmare. If you find yourself fielding phone calls from employees with questions about how to increase their contributions, or even how to enroll in the plan, that’s a sign your provider isn’t delivering a level of customer service commensurate with your company’s success. The same goes if employees are cornering you in the break room to ask for advice on asset allocation, or have questions about specific investment options. A good provider should not only be answering these questions as they arise, but also should limit the need for such questions by providing first rate employee education. At ForUsAll, our virtual advisor DAVE can walk your employees through your plan’s details and even help them customize their investment choices or alter their salary deferral.
Growing companies must attend to a variety of regulations around employee notifications and communications, and tracking employee eligibility can become a massive burden. ForUsAll can track employee eligibility, provide documents to participants, process and record participant requests, and answer questions about your 401(k).
3. Fewer new employees are enrolling in your plan.
When you had time to personally explain your 401(k) plan to each employee, they probably got the message. In fact, the close-knit group that helped your company grow to where it is today was probably instrumental in getting your plan started in the first place. But with less time available to spend with each new hire, it’s up to your plan provider to make sure these newbies understand how your plan works. Besides, your plan needs solid participation to comply with IRS top heavy rules. And the less these new hires understand about the plan, the less likely they are to enroll. At ForUsAll we have a great track record of employee engagement, with a participation rate near 89%.
4. You are increasingly concerned about your liability as the plan sponsor.
Let’s say your company has grown since you started your retirement plan. That means your plan’s assets have probably grown as well. When you see that big number representing total plan assets, and when you tally up the number of participants in the plan, you may worry about your liability as the plan sponsor. Well, now is the time to make sure your provider has your back. For example, while your investment advisor may discuss investment options in reasonable, measured tones, you may still be responsible for the investment decisions. If your intention is to delegate those fund selections, make sure your investment advisor is a 3(38) fiduciary.
Similarly, maybe your provider does some plan administration, and even consults with you on completing the IRS Form 5500. You may still be on the hook as a fiduciary and retain all legal liability of plan administration. If you are seeking to maximize the time you and your employees work on your business and limit your fiduciary responsibilities, ForUsAll will bring on board a 3(16) administrative fiduciary. Working with ther Named Plan Administrator, ForUsAll’s advisory team can handle the day-to-day operations of your plan, and handle the investments.
5. You haven’t performed a serious plan comparison in more than three years.
If it’s been a while since you checked out the competition, you may be surprised at how clever technology is making 401(k) plans more user friendly, efficient and less expensive. At ForUsAll we can offer automatic enrollment with automatic savings rate escalations. ForUsAll can get employees up to speed on the retirement plan with mobile on-boarding and employee education through “DAVE,” our award-winning virtual advisor.
Regular plan benchmarking is recommended by the Department of Labor. In addition to seeing what other technology and employee outcomes are possible, you should also be interested in seeing if other recordkeeping platforms can offer lower costs. And again, you ought to be regularly looking at your fund lineup and making sure you are offering appropriate investment options.
Your business has come a long way, but if your retirement plan is lagging behind, check out our 401(k) Check List for comparing providers. This handy tool will help you compare fees on an apples-to-apples basis, compare fiduciary responsibilities to be taken on by each provider, and give you information about how successful they are at getting employees to participate in their plans. When you’re done, you’ll know whether the providers under review will merely help with your Form 5500 or complete it for you. And whether they will perform tasks like reviewing non-discrimination testing, or handling hardship withdrawal requests.
By giving your plan a thorough review, you can learn how it compares with those offered by today’s new generation of plan providers. You deserve a plan that has your back and lets you focus on your business. Who knows? You may be overdue for a trade-in.
Learn more about how to optimize your SMB’s retirement plan with our “5 Ways to Optimize Your Retirement Plan” white paper.
Ready to talk with a retirement consultant who is excited to offer advice and investment options that are only in your best interest? Schedule a time to talk with ForUsAll today.
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