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.
All 401(k) plan contributions have deposit deadlines – and it’s up to 401(k) fiduciaries to meet them. Yet, many employers are unclear about the deadlines applicable to their 401(k) plan. That confusion can easily lead to late contributions. When that happens, there are always consequences for the employer. They range from mild (losing a tax deduction, making participants whole for lost earnings) to severe (plan disqualification, IRS and/or civil penalties). Fortunately, these consequences are easily avoided with some basic education.
Happy Holidays from the Frugal Fiduciary! As 2018 comes to a close, we looked back through this year’s blogs to find the most read. It turns out our most popular blogs related to the following topics:
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.
Over the years, I’ve met with countless small business owners thinking about replacing their current SIMPLE IRA (Savings Incentive Match PLan for Employees) with a new 401(k) plan. During these meetings, the most common questions I receive are:
Employers have a fiduciary responsibility to ensure the fees paid by their 401(k) plan participants are “reasonable” and not subject to unnecessarily excessive fees. To do that job, employers must benchmark their 401(k) fees - basically, compare them to industry averages and/or fee charged by competing 401(k) providers. Sounds straightforward, but this information is hard to find and often harder to compare on an apples-to apples basis.
401(k) plans are popular today because they offer generous tax benefits to employers and employees. However, to qualify for these benefits, 401(k) plans must complete a myriad of administration tasks each year. It’s up to employers to ensure each task is completed timely. This important fiduciary responsibility can easily seem overwhelming, but it doesn’t need to be. The key is hiring a 401(k) provider willing and able to do three things - 1) summarize all required tasks, 2) complete the more difficult and time-consuming ones, and 3) provide simple direction for the rest.
American Funds (“AF”) is the third largest mutual fund company in the US and a dominant provider of small business 401(k) plans. Their plans are loaded with proprietary in-house funds. While there is nothing inherently illegal or unethical about that, the situation could create a conflict of interest that results in an overpriced 401(k) plan. To confirm their 401(k) participants are not harmed by a conflict, employers must ensure their AF fees are reasonable. To do that, employers must be able to total them – so they can then be benchmarked against competing 401(k) providers. AF doesn’t make this job easy.