Plan Sponsor FAQ's
401k Plan Potential Mistakes - Summary: This 43 page document was prepared by the IRS and tells you what potential plan mistake there are, how to identify the them, how to correct the mistake and how to avoid the problem. There is a lot of good information in this. Located at: IRS.gov or Click on headline for the full article.
Why should I be so concerned about Plan Fees?
As
a plan fiduciary,
you have an obligation under ERISA to prudently select and monitor plan
investments, investment options made available to the plan’s
participants and beneficiaries, and the persons providing services to
your plan. Understanding and evaluating plan fees and expenses
associated with plan investments, investment options, and services are
an important part of a fiduciary’s responsibility. This
responsibility is ongoing. After careful evaluation during the initial
selection, you will want to monitor plan fees and expenses to determine
whether they continue to be reasonable in light of the services
provided.
In recent years, there has been a dramatic increase in the number of
investment options, as well as level and types of services, offered to
and by plans in which participants have individual accounts. In
determining the number of investment options and the level and type of
services for your plan, it is important to understand the fees and
expenses for the services you decide to offer. The cumulative effect of
fees and expenses on retirement savings can be substantial.
Where Can I Get Information about the Fees and Expenses Charged to My 401(k) Plan Account?
If you have questions about the fees and expenses charged to your 401(k) plan, contact your plan administrator, who should be able to assist you with the following documents:
If your plan permits you to direct the investment of assets in your account, the plan administrator should provide you with copies of documents describing investment management and other fees associated with each of the investment alternatives available to you (i.e., a prospectus). The plan administrator should also provide a description of any transaction fees and expenses that will be charged against your account balance in connection with the investments you direct.
Your account statement will show the total assets in your account, how they are invested and any increases (or decreases) in your investments during the period covered by the statement. It may also show administrative expenses charged to your account. Account statements will be provided once a year upon request, unless your plan document provides otherwise.
Your 401(k) plan’s summary plan description (SPD) will tell you what the plan provides and how it operates. It may tell you if administrative expenses are paid by your plan, rather than by your employer, and how those expenses are allocated among plan participants. A copy of the SPD is furnished to participants when they join a plan and every 5 years if there are material modifications or every 10 years if there is no modification.
The plan’s annual report (Form 5500 series) contains information regarding the plan’s assets, liabilities, income and expenses and shows the aggregate administrative fees and other expenses paid by the plan. However, it will not show expenses deducted from investment results or fees and expenses paid by your individual account (Beginning in 2008 it will). Fees paid by your employer also will not be shown. You may examine the annual report for free or request a copy from the plan administrator (for which there may be a charge). In general, the summary annual report, which summarizes the annual report information, is distributed each year.
In addition, you may want to consult the business section of major daily newspapers, business and financial publications, rating services, the business librarian at the public library or the Internet. These sources will provide information and help you compare the performance and expenses of your investment options with other investments outside of your 401(k) plan.
If, after doing your own analysis, you have questions regarding the rates of return or fees of your plan’s investment options, ask your plan administrator for an explanation.
Is There
a Checklist I Can Use to Review My 401(k) Plan’s Fees?
There are an array of investment options and services offered under today’s 401(k) plans. While there is no easy way to calculate the fees and expenses paid by your 401(k) plan due to the number of variables involved, you can begin by asking yourself questions and, if you cannot find the answers, by asking your plan administrator. Answers to the following 10 questions will help in gathering information about the fees and expenses paid by your plan.
401(k) Fees Checklist
Keep in mind that the
law requires the fees charged to a 401(k) plan be “reasonable”
rather than setting a specific level of fees that are permissible.
Therefore, the reasonableness of fees must be determined in each case.
What do you mean when you say "cost effective, cost transparent, open architecture" when referring to Retirement Plans?
By "cost effective" we mean "you are receiving what you pay for" there are many plans out there that are very expensive and you are not getting the level of service & support you are paying for which is a big issue right now. The ideal situation is to pay for the services you and your participants need and use, and nothing more. And as those needs change be able to adapt to those changes.
By "cost transparent" we mean there are no hidden cost in the plan. Every year Michelle Ogden & Company will sit down to review the plan, including fees, participation, and investment performance. There will not be anything hidden when it comes to the fees & expenses of the plan.
"Open architecture" refers to the technology that allows multiple service providers to communicate and share data electronically. it allows continual transmission of files - a constant flow of up-to-date plan information between the plan sponsor's payroll, participants, third-party administrators, plan investment companies, and investment advisers. The ability to provide data to, and receive data from, a variety of investment providers means that Michelle Ogden & Company as the adviser have more options and control. Instead of being limited to a group of investments in a bundled or proprietary arrangement where you can only have these investments that the bank provides or that the mutual fund offers, you have access to an entire variety of investments.
Retirement Plan fee analysis prices range considerably and depend on many factors. Some of those factors are the size of the plan assets the number of participants with Balances, the type of plan, the complexity of the plan design and the availability of requested financial and tax information. While most plan sponsors look at the explicit cost of a the plan review few look at the cost of not getting the review. For example, the plan sponsor many times is the largest account holder in the plan; and if the fees are high on that plan, the plan sponsor is paying the lions share of those high fees. And I don't even like to consider the cost of litigation if a participant were to come forward and claim the fees are too high and take legal action. But one thing I must impress upon Plan Sponsors is other advisers do look at your participants Statements when giving thorough Financial guidance on the Accounts they hold with them. If those advisers are familiar with Retirement Plans something might be brought up.
Will you speak to us initially without a charge?
Most definitely! I would try and keep the initial discussion to 30 -40 minutes. Normally in that amount of time I can get a good feel of if my services are necessary and what the cost would be to proceed. I have actually been able to tell just from an initial phone call that a Plan Sponsor had a great Plan and that my services were not necessary. What a relief for them!
"Nothing can stop the man with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude."
- Thomas Jefferson