The Frugal Fiduciary Small Business 401(k) Blog
Get the latest industry news, deadlines and tips you need to know to help tackle your fiduciary responsibility needs.
The U.S. Government Accountability Office (GAO) is federal agency that, according to its website, “provides Congress and federal agencies with objective, non-partisan, fact-based information to help the government save money and work more efficiently.” In an August report, the GAO assessed the effectiveness of the Department of Labor’s (DOL) 401(k) fee disclosure rules. They found that nearly 40% of 401(k) plan participants do not understand the fee information mandated by the DOL. This much confusion is a big problem when you consider the cumulative effect of 401(k) fees over time. To manage these losses, participants need a clear understanding of their 401(k) fees.
I recently read an interesting article in the New York Times titled Stop the Hidden-Fee Rip-Off. In the article, a lawyer for the Institute for Policy Integrity calls on the Federal Trade Commission (FTC) – a government agency charged with protecting consumers from deceptive, unfair and anticompetitive trade practices – to ban “hidden fees in all industries.” I could not agree more. Hidden fees make it harder than necessary for consumers to make informed buying decisions. I think the FTC should start with hidden 401(k) fees given their impact on retirement’s affordability.
Subscribe to the The Frugal Financial Small Business 401(k) Blog and receive this free checklist for help in determing the best 401(k) plan design options and fit for your company.
At Employee Fiduciary, we know a cost-efficient 401(k) plan with the right features can dramatically reduce the out-of-pocket cost of retirement for participants. For that reason, we’re passionate about delivering 401(k) education that makes it easier for employers to offer such plans and their employees to take full advantage of them. To that end, we’re proud to announce the release of our new knowledge center – which includes impartial 401(k) education for both employers and retirement savers.
401(k) plan fiduciaries are often concerned about their fiduciary liability – little surprise when they can be personally liable for fiduciary failures. To mitigate this risk, fiduciaries must understand the sources of liability. A way to do that is asking insurance companies about the factors that increase the price of 401(k) fiduciary liability insurance.
As a business owner, you must operate your 401(k) plan according to the terms of a written plan document. Most plans use an IRS preapproved document for this purpose. All preapproved documents must be fully rewritten (or restated) every six years to reflect recent law changes. The last 6-year restatement cycle was called “PPA” after the Pension Protection Act. A new cycle - called "Cycle 3" - opened last year. Between August 1, 2020 and July 31, 2022, all pre-approved 401(k) plans must be restated from a PPA to a Cycle 3 plan document. That means now.
As a business owner, you want to understand the basic fiduciary hierarchy applicable to all 401(k) plans and the responsibilities of each role within it. This understanding can make the oversight of your 401(k) plan – basically ensuring that your fiduciary responsibilities are met – much more straightforward.