While a retirement plan committee’s focus is on its fiduciary responsibilities, it can also help employees become more financially fit for retirement. That’s because it’s about the outcomes, not just the important duties the committee must perform.
A key part of supporting positive outcomes for employees is partnering with a 401(k) advisor. In this article, we’ll explore five ways a diligent 401(k) advisor can help your committee fulfill its fiduciary obligations while driving the best outcomes for your retirement plan and your employees. At the end of each section are two questions that you should be able to answer as a committee member.
1. Helps Lower Plan Expenses
As a plan grows, retirement plan providers can typically lower their relative fees. Strong 401(k) advisors help by advocating regularly on behalf of a plan for lower fees while benchmarking the fees and services against similar companies and plan sizes. The result is plan fees that are competitive, reasonable, and provide reliable value.
Question: When was the last time your 401(k) recordkeeping fees were reduced?
Question: Have you benchmarked your 401(k) Plan fees in the last year?
2. Advises on Diversified Investment Selection
With a 401(k) advisor acting as an independent fiduciary, your committee can ensure the plan’s lineup is well diversified, performs well compared to benchmarks, and takes on appropriate levels of risk.
Your advisor also helps your committee navigate passive versus active management, use low-cost share classes, and compare collective investment trusts to mutual funds. The result is a lineup that you can trust to deliver long-term, risk-responsible results for your employees.
Question: Are you confident your investments are in the lowest share class available, which includes available CITs?
Question: Do you have a consistent and objective methodology to evaluate your funds on a quarterly basis?
3. Advises on Target-Date Funds
Many retirement savers prefer a hands-off, target-date approach to investing, which is why these funds are the most common default option in retirement plan lineups. Target-date funds offer benefits like professional management, diversification, and automatic rebalancing toward more conservative investments as the target date approaches. A strong advisor will educate the committee on the target date’s glidepath, underlying funds, risk-adjusted performance, index versus active, and how they compare to other target-date fund families.
Question: Do you know if your target-date series is a “to” or “through” glide path?
Question: Do you know the underlying asset classes included in your target date series?
4. Optimizes Plan Design for Employee Engagement
Proper plan design is crucial to recruiting and retaining talent. Decisions around eligibility, automatic enrollment, match type, or even mega backdoor Roth can have a real impact on your employee’s savings habits and the overall effectiveness of the plan.
Your 401(k) advisor can help your committee design a plan that’s tailored to your employees’ needs, encouraging them to save more, and work toward retirement readiness.
Question: Has your plan struggled with participation?
Question: Have you evaluated mega backdoor Roth as a potential plan design change?
5. Keeps Your Plan Aligned with Regulatory Changes
The retirement plan industry is constantly evolving due to legislative changes, like SECURE 2.0, and updates from the IRS and Department of Labor.
Your 401(k) advisor will work with your committee to make sure you’re up to speed on all industry updates, so you’re not missing out on provisions that may benefit your employees or are required by law.
Examples include matching student loan payments, offering Roth employer contributions, requiring automatic enrollment for newly established plans, or setting up a withdrawal option for emergency expenses. Regulations are complex, but a strong 401(k) advisor can help you understand the positive impact they may have on your employees.
Question: Are you confident you have taken advantage of the optional plan provisions that may benefit your employees through SECURE 2.0?
Question: Are you ready to administer the required provisions of SECURE 2.0 as they roll out?
To sum it up, look at your retirement plan committee as the invisible hand guiding your employees to one of life’s most important financial goals, retirement. With the help of an independent, experienced 401(k) advisor, your committee can use the power of their fiduciary duties to produce people-first focused outcomes.
Pensionmark Financial Group LLC (“Pensionmark”) is an investment advisor registered under the Investment Advisors Act of 1940. Pensionmark is affiliated through common ownership with Pensionmark Securities, LLC (Member SIPC).
Disclaimer: This communication is intended for information purposes only and should not be construed as legal or tax advice. It provider general information and is not intended to encompass all compliance and legal obligations that may be applicable to your situation. This information and any questions as to your specific circumstances should be reviewed with legal counsel and /or a tax professional.
