Employee Retirement Plans

By Dylan Mazeika

Plan design

When you have made the final decision to either add a new 401K or change 401K providers, the first item on your agenda is to decide on what benefits and features you want the program to include. If you have spoken with employees and discovered the features that they like the most, it can prompt you to ask each provider if they can easily facilitate that option. If the final decision was made by consensus of upper management, more than likely they made suggestions or requests on specific benefits.

• What actuarial methodology is used by retirement plan providers when determining contribution levels?
• What is the vesting schedule? Can you change it?
• Is it possible to integrate the plan with Social Security benefits?
• How often can employees/the employer move accrued benefits between funds?
• How frequently can the plan be amended?
• How often will plan participants receive information on their available benefits?
• How are the accrued benefits distributed to retired participants (lump sum, annual or monthly allowance, etc.)?
• What are the requirements for plan participation? Can they be adjusted?

Operational considerations

Company executives are generally well-versed in the stock market, mutual funds and the like. They will be the ones most concerned about the questions below. If the employer has to be responsible for keeping up-to-date on changing IRS rules, this may necessitate having a current employee divide time from his or her normal job to help facilitate the 401K plan. If the employer is searching for a turn-key provider, the answer to this question may be a deal-breaker.

• Is it possible to invest our assets in funds that are not managed by your company?
• What information will we receive about investment options?
• Is there a minimum length of time we must stay with your company for plan administration?
• What guarantees do you have to back our contributions/plan assets?
• Who will be responsible for maintaining the plan documents so they are up-to-date with respect to new or changing IRS rules?
• Who will we be working with in the future?

Plan costs

In business, everything boils down to dollars and cents. Employers want to find the ideal provider at the lowest cost possible. However, one provider may submit a low set-up fee and a low cost per employee but make up the difference in charging higher fees for moving assets from one account to another. If the employer has narrowed down the selection to three prospects it is then wise to complete a spreadsheet where all three can be compared bottom line. What may appear to be a great value with a very low or non-existing set-up fee may in fact be the highest cost among the three.

• What are the fees for setup? (Usually, there is a base fee and a per participant fee.)
• What is included in this base setup fee (prototype documents, summary plan description, etc.)?
• Is the IRS user fee included in the basic fee?
• What are the annual charges for plan administration (base and per participant)? Note: If possible, try to get this over a period of 5-8 years.
• What is included in the annual fee (summary annual report, IRS filings, discrimination testing, etc.)?
• What are the charges for moving assets from one fund to another?
• Are there additional charges for employees withdrawing from the plan or new accounts being rolled into the plan?
• What would it cost to amend the plan?
• What would it cost to terminate the plan?

Training for participants

When employers roll out 401K programs or change programs, there are usually group meetings where the new plans are presented followed by a question and answer period. Employees are handed complete packets with the information they have been provided orally. Sometimes the plan provider comes in to make the presentation and other times they may train someone in the HR Benefits area so that expert assistance is always available to the employees. It is wise to ask if the provider has a training program and if so, is it included in the set-up fees.

• Do you offer training on 401k operation for my employees?
• Do you offer instructional manuals, videotapes, seminars?
• Do you offer individual counseling?
• How much would this training cost?
• What would it cost to terminate the plan?