Are All 401(k) Plans Equal?

The 401(k) Plan- Even with the best intentions, and with good returns, when it comes to meeting plan sponsors’ fiduciary responsibilities, it’s just not enough. Although a strong 401(k) plan can be a great retention tool for employers trying to hold onto valuable employees, liability tends to go well beyond poorly performing investments. In fact, it is essential that plan sponsors exercise complete diligence in selecting and monitoring all investment options. Enter the Multiple Employer Plan.

Multiple Employer Plan (MEP) – a retirement plan for businesses that typically share a common interest (PEO) but do not share ownership, which can offer the fiduciary protection so dearly needed by plan sponsors.

In fact, according to the 401kHelpcenter.com, small employers rank maintaining fiduciary compliance among the top of all concerns associated with sponsoring a retirement plan. So in the same way plan sponsors strive to protect the best interests of their employees, Employers Resource can help protect plan sponsors by offering our clients membership in an MEP through Slavic.

A 401(k) Plan Can Be A Wolf in Sheep’s Clothing

Sometimes retirement savings plans can turn bittersweet as your employees discover the hidden/back-end fees that these 401(k) plans often have like 12B Transactions and other sneaky transactions. There have been recent crackdown on 401(k) providers to be more transparent and be more forthright concerning hidden costs and fees related to their services. Slavic401k had been compliant with the new laws well before they were implemented. Simply because, like Employers Resource, they believe that if you treat people well, they have reason to stick around.

Employers Resource’s Slavic401k Plan

Offering a 401(k) plan as an elected benefit is a great option to have for your employees. Employers Resource not only offers you the benefit of being part of an MEP plan opposed to a SEP plan (see comparison below), we also partner with one of the most trusted names in the 401(k) industry, Slavic401k. Slavic401k offers a great alternative to other plans which are expensive, burdensome, and full of liability. They specialize in cost-effective offerings with the PEO arrangement.

Our clients benefit from the long-standing relationship we’ve enjoyed with Slavic401k. We believe that our Slavic401k is the best in the country. We chose Slavic401k plans early in our years and we are so thankful that we did. We’ve had a great relationship with them ever since.

MEP vs. SEP

Normally an employer that has over 100 employees, with a 401(k) retirement plan, is required to pay for a mandatory audit costing over $10,000 each year. Our clients don’t have that cost because they are in what is termed an MEP as opposed to a Single-employer Plan (SEP). Many businesses outside the PEO world use a SEP. With an MEP, there is one of these audits performed for the entire group, rather than for each client. Providing what we think is the best 401(k) plan in the country is a huge benefit to the employers we work with.

Here’s a breakdown of MEP vs. SEP Plan Sponsor Duties. Which one looks easier to you?

Plan Sponsor duties BEFORE MEP joining a Multiple Employer Plan

  • Design plan document and maintain qualified status
  • Appoint and monitor all other plan fiduciaries

Plan Investment Fiduciary duties

  • Produce and maintain an Investment Policy Statement (IPS)
  • Select investment platform meeting ERISA “Prudent Person” standards
  • Conduct Investment Committee meetings
  • Review and document investment returns, fees, expenses, and comparisons to peer group
  • Monitor all investment options and remove or replace as appropriate
  • Operational Plan Administrator duties
  • Determine participant eligibility
  • Conduct enrollment and educational meeting
  • Send out enrollment packets including Summary Plan Description (SPD), 404(c) Compliance

Information, Qualified Default Investment Alternative (QDIA), and Explanation of Expenses

  • Comply with ERISA Section 2550.404(c) provisions for participant communication, including but not limited to:
    • Notice to participants of intention to comply with 404(c)
    • A description of investment alternatives available in the plan
    • General description of the investment objectives and risk and return characteristics of each alternative
    • Description of transaction fees and expenses that affect the participant’s account balance
    • Specified information regarding the plan fiduciaries
    • A description of the annual operating expenses of each designated investment alternative
    • Copies of prospectuses, financial statements, and reports provided to the plan
  • Address specific participant requests and/or instructions in compliance with 404(c)
  • Administer participant loans in compliance with statutory requirements
  • Send out Participant Termination packets
  • Administer distribution and rollover requests for ex-employees
  • Administer hardship withdrawals in compliance with the Hardship Rules, included in new provisions of PPA of 2006
  • Oversee annual census reconciliation with TPA

Plan sponsor responsibilities AFTER joining a Multiple Employer Plan

  • Select customized plan design options to meet your business needs
  • Serve as a co-adopter of the plan

Offering savings, benefits, and retirement-related benefits are a major plus for attracting and retaining talent. If you are interested in learning more about how Employers Resource allows you to offer better benefits to your employees click here.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *