401(k) and Retirement Plans

by CoVaBizMag


How can I ensure that my employees get a fair value from our 401(k)/retirement plan?



By Donald S. Hannahs

As a business owner, human resource professional or future retiree, the Department of Labor recently issued a historical ruling known as the Fiduciary Rule. This controversial rule, which was opposed by many investment firms, should be viewed as a victory for retirement savers because consumers can now expect their advisors to act as “Fiduciaries.”

Prior to this ruling (MarketWatch, 4/6/2016), advisors were not required to put the best interests of their clients first. Advisors will no longer be able to steer clients to inappropriate investment products.

If you are a plan sponsor or trustee at your place of employment, the new ruling is going to change how your 401(k) service providers interact with you going forward as they compare vendors, provide benchmark studies on fees and expenses, receive compensation and build the investment lineup. In the 401(k) vendor marketplace, each vendor and advisor does have the need and right to receive compensation for services rendered. However, in the past it wasn’t always clear who or how various parties were getting paid.

In order for you to determine whether you are meeting your fiduciary responsibility to your employees, here are questions to ask your 401(k) plan provider:

  • Am I paying a flat fee for service or a commission-based fee?
  • Will you be (and does your firm allow you to be) acting as a fiduciary to our plan and participants?
  • Do all employees pay the same percentage fee, or are some investment choices generating more revenue for the record-keeper?
  • Do our fees automatically go down as the plan assets grow?
  • How do you decide which funds are included in the fund lineup offered to our employees?
  • When was the last time a vendor comparison was made to compare features, benefits and costs?
  • Can our target-date fund provider be changed without increasing our fee schedule?
  • Are you failing a discrimination test which limits owners/high income participants from fully funding their account?
  • Should you offer investments from multiple fund families instead of only offering one family of mutual funds?

Also, ask your advisor how many 401k plans they personally oversee, to assure it is their primary business.

Donald S. HannahsDonald S. Hannahs, CFP is a founding partner of Planning Solutions Group, a wealth management firm with offices in Virginia and Maryland. Don has over 20 years’ experience working with successful professionals and business owners. He is on the Board of Advisors of the CEE Fund at Christopher Newport University and is an adjunct professor at Montgomery College in Rockville, Md. R

each Don at Dhannahs@PSGplanning.com, or visit PSGPlanning.com to learn more or sign up for their free monthly newsletter on tax, financial and business strategies.

Securities offered through Triad Advisors, Member FINRA/SIPC. Advisory Services offered through Planning Solutions Group, LLC. Planning Solutions Group, LLC is not affiliated with Triad Advisors.

 Disclaimer: This column is for informational purposes and should not be considered personalized investment advice. Everyone’s circumstance is different, and individuals should seek investment advice based on their unique financial situation. All investments are subject to risk, including loss of principal.

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