Craig Hall, The Business Times:
“It really comes down to a simple question,” says Patterson McKinlay of Moody Insurance Agency, “And that is simply whether or not your employees want a 401k plan and will they participate.” Too many employers rush to offer a plan only to find out that just the owners and officers enroll which can lead to a lot of wasted time and effort, not to mention year-end testing and compliance problems.
If your company does make a decision to start a plan, it is best to benchmark at least four or five different providers as fees, fund choices, year-end compliance and many other factors can vary greatly. The due diligence your company does in selecting your plan provider will also help in answering participant questions as to why your company chose that provider and advisor. Taking these steps should also help your company in choosing a provider that focuses and specializes in 401ks.
“Having an advisor that is a co-fiduciary also has its advantages,” says McKinlay, “As the advisor can be more involved in the critical decision that need to be made and they can also be more active in the services they provide to your company and the plan participants.” Companies should also be aware of the fees involved in the services being provided and who is responsible for covering them, and this should be examined on a yearly basis. One other consideration for your company is in identifying just who in the organization is responsible for the day-to-day administrative requirements for your plan.
Two final considerations for your company’s 401k plan will be to determine if it will offer a match to the funds participants are putting in and whether or not loans will be allowed. If your company does offer matching funds, it is best to offer a discretionary match, allowing the company to stop matching funds at any time it desires, something that is very helpful in difficult economies. As for loans, many companies prefer to limit access to funds by requiring a hardship be proven before a loan is granted.
“Creating a plan that requires your employees save in order to receive matching funds while limiting their access to those funds is the best way to assure your employees are indeed using a 401k to close the retirement savings gap.” added McKinlay.