The Department of Labor (DOL) made headlines in June when it announced it was abandoning efforts to implement a new fiduciary standard for company retirement plans. Mainstream business media and financial services trade publications chimed in with opinions, both pro and con, about how company plans will be affected.
Regardless of what the DOL designates, Argent Institutional Services has always followed the fiduciary standard, and we always will. (Read more about Argent Financial Group’s position on the importance of being a fiduciary.)
Because fiduciaries are legally required to put the client’s interests first, we make sure we are looking at the “big picture” and understand how a plan’s various components are interconnected, which leads to a more holistic approach in the management of a client’s assets.
That’s the level of service that you want from your retirement plan provider – whether your contact is a fiduciary or not. Work with your vendor to do these three things to improve your company’s plan:
1. Eliminate retirement plan fee creep
Many retirement plan fees are based on the total value of asset balances in the account (referred to as wrap fees). At Argent, we have noticed that a plan’s assets will typically double every five years due to growth in employee contributions and increases in the value of the plan’s investments. What companies may not realize is that during this five-year period, fees are doubling as well – and probably without any extra services from the retirement plan provider.
And these increasing fees are easy to overlook, because for businesses large and small the administration and maintenance of a retirement plan is time-consuming. Tasks such as compliance paperwork, contribution tracking and employee enrollment take precedence. That means a business may pay less attention to the fees charged by the retirement plan provider.
Your provider should be looking at the big picture and finding instances where fees have escalated unjustifiably – and then address them, such as by negotiating lower wrap fees or moving clients to a per-capita fee where charges are based on a per-participant, per-year rate.
2. Be actively engaged in plan management
Any provider can set up a plan. The best ones stay actively engaged with their clients throughout the year.
On the administrative side, your plan provider should request to meet with you regularly, such as every quarter, to review your plan’s performance and, if appropriate, suggest adjustments. And, if it’s not already a standard operating procedure, ask your provider to send you minutes of the meeting that outline what was discussed and actions that were approved.
On the employee side, it’s not enough for a human resources team member to hand out a brochure or package upon hiring or to hold an annual meeting to discuss plan changes. Look to your provider to help you incorporate your retirement plan into your company’s overall financial wellness program – and help you to effectively communicate this benefit to your workforce to encourage participation. An estimated 55 percent of workers have less than $50,000 saved for retirement. A well-designed plan aimed at increasing participation can help your employees better prepare for retirement.
3. Think strategically about your retirement plan
A company retirement plan is more than employer contributions to a 401(k). Your provider should be able to explain how your retirement plan compares to the competition in order to help you attract and retain skilled team members. Less employee turnover can lead to lower HR costs and higher team member productivity.
Look to your provider to help you think strategically about your retirement plan in this way. That is, a good provider goes beyond “how” to set up and maintain a plan to “why” you have a plan in the first place. It should outline the various reasons a business offers a retirement plan – such as retaining talented staff, maintaining a strong and supportive company culture, enhancing your company’s reputation or simple altruism – and help you work out, elucidate and act on the reasons your company offers a plan. Thinking about your plan in this way makes it more likely that you get the most of this benefit.
Company retirement plans can be challenging to manage, and federal rules are constantly changing. Partner with your plan provider or advisor to ease the burden, reduce costs and increase participation so you can focus on running your business.