frequently asked questions

1. What are the advantages of using a fiduciary advisor vs. going directly with a provider?

Using a fiduciary advisor provides you with more fee transparency, including not passing hidden fees onto employee accounts. Fiduciary advisors typically offer more employee education and engagement and are able to provide independent reviews of investment vehicle choices with no proprietary fund requirements

Does my plan have a broker or a fiduciary advisor?

If your advisor has a Series 65 license and is affiliated with a Registered Investment Advisory (RIA), then they are probably a fiduciary.  If they have an insurance license, they are probably not a fiduciary. If your plan files a Schedule A with the 5500, that usually means they are not a fiduciary.

Does it make a difference?

YES!  Fiduciary’s offer more liability protection to plan sponsors, more complete knowledge of ERISA (which governs retirement plans), and better investment choices for plans under their guidance.

What is the participant count for a mandatory audit?

Generally, plans that have 100 or more participants must be audited annually. There is the “between 80 and 120” rule which allows plans with 80 and 120 participants, as of the first day of the plan year, to file the form 5500 in the same category as indicated in the prior year (“large plan” or “small plan”). Remember, all eligible employees count towards the number as do terminated participants that still have a balance.

My payroll vendor offers a 401k that claims to be “seamlessly” integrated, are such offerings in the best interests of employees?

There is much more to 401(k) administration than payroll deductions.  Retirement plans must abide by the highly technical rules of the Employee Retirement Security Act of 1974 (ERISA), ESPECIALLY testing for discrimination of contributions to highly compensated employees, as well as choosing/monitoring investments, negotiating fees, plan benchmarking and employee education.  Payroll vendors offer little in the way of guidance on these significant plan design needs and generally, the costs are the same or higher than those of an RIA. 

What are Robo 401k Plans? Are they good or bad?

Similar to payroll vendors, these companies claim to offer ease of administration, but often fall short on thorough plan administration. These companies often do not stand the test of time, leaving plan sponsors high and dry when they go out of business.

What is the difference between 403b and 401k plans? (Testing/ERISA vs Non-ERISA)

A 403(b) plan is only permitted for companies that are non-profit organizations.  403(b) plans do not allow employee exclusions or wait periods, and as such do not require the same discrimination testing required by 401k plans.  Companies sometimes erroneously think they qualify for a 403(b) plan and put them in place without being eligible.

Our company’s fund offering appears to be an insurance annuity not an institutional mutual fund, how can I tell for sure and does it matter?

If your retirement plan files a Schedule A with the 5500, you are likely an insurance annuity product.  If your plan has “ticker symbols” for the investment options, they are likely mutual funds.  The difference is fees and advisor licensing.  Generally, fees are higher for insurance annuities, and they are sold by advisors that lack the necessary licenses to sell mutual funds. 

What is an ERISA Bond and why does a retirement plan need one?

ERISA requires a bond to cover those administering the plan and protect plan participants against losses caused by fraud.  ERISA bonds can be purchased from a surety that’s named on the Department of Treasury’s Listing of Approved Sureties.  A plan advisor can help secure the required bond.

What are the benefits of implementing a company match for both employers and employees?

The benefits of a company match for employers include tax benefits and more competitive benefits for attracting and retaining talented employees.  Another benefit to employers is increased employee participation which helps the discrimination tests required by ERISA.  The benefit of a company match for employees is “free money”, meaning that the money contributed to an employee’s account by an employer is additional savings and an investment that grows tax free until withdrawal.

Does a retirement plan need a TPA and do TPA’s offer fiduciary protection?

It depends. TPA’s are typically responsible for common administrative tasks including plan document maintenance, form 5500 preparation, and some non-discrimination requirements.  A TPA may or may not offer fiduciary protection, but generally do not offer the advanced level of fiduciary liability protection as that of an Accredited Fiduciary Advisor. 

“Planning is bringing the future into the present – so you can do something about it.”     

~ Alan Lakein

The Retirement Doctor is In

With decades of experience in every aspect of plan design, administration and investments, Mike Rogers offers wisdom and advice to fix any retirement matter. If you submit a question below, the doctor will be in touch with his diagnosis.

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