Are Your 401(k) Fees “Reasonable?”  Benchmark Them to Find Out If you're a 401(k) plan sponsor, you have a fiduciary responsibility to only pay reasonable plan fees and expenses from plan assets. Keeping 401(k) plan fees in check is one of your most important fiduciary responsibilities because even small excessive fee amounts each year can substantially reduce a participant nest egg over decades of saving. Excessive 401(k) fees can also mean severe ... Read Post
The DOL Fiduciary Rule – What Employers Need to Know On June 9, the Department of Labor's (DOL) Fiduciary Rule took effect and upgraded every stock broker and insurance agent with a 401(k) client to a plan fiduciary under ERISA. However, there is a catch – while these financial advisors were made ERISA fiduciaries on June 9, the DOL won’t “pursue claims against fiduciaries who are working diligently and in good faith to comply with the ... Read Post
401(k) Distribution Rules – Frequently Asked Questions If you participate in a 401(k) plan, you should understand the rules for withdrawing money from your account – otherwise known as taking a distribution – even if you don’t plan to touch this money for decades. 401(k) plans have restrictive distribution rules that are tied to your age and employment status.  If you don’t understand your plan’s rules, or misinterpret them, you can pay ... Read Post
Acquisition or Merger? Don’t Overlook the Seller’s 401(k) Plan! If you’re a small business 401(k) plan sponsor considering the purchase of another company, the last aspect of the deal you’re probably considering is the seller’s 401(k) plan.  However, it’s important for you to have a strategy for that plan in place before your deal is closed.  Otherwise, you could be stuck with a 401(k) plan that includes costly protected benefits or uncorrected defects.  Read Post
DOL Fiduciary Rule: Good for Business But Opposed by the U.S. Chamber of Commerce In February, President Trump ordered the Department of Labor (DOL) to review the Fiduciary Duty Rule as a likely pretense for killing it. To complete the review, the DOL delayed the rule’s implementation by 60 days and asked the public for fresh comments. Read Post
New Comparability 401(k) Plans - Are They Right for Your Small Business? One of the most common goals for a small business 401(k) plan is maximizing owner contributions up to the legal limit - $60,000 for 2017 (assuming employee catch-up contributions). Often, the cheapest way to meet this goal is using a new comparability profit sharing contribution. Unlike other types of 401(k) profit sharing, these contributions permit an employer to allocate multiple ... Read Post
Fee Study of 525 401(k) Financial Advisors – Why Trump Can’t Reverse Tide of Fiduciary Advice This week, the DOL delayed the effective date of its Fiduciary Rule – which would define all retirement plan financial advisors as ERISA fiduciaries, effectively banning conflicted 401(k) investment advice that puts advisor profit ahead of client interests – by 60 days from April 10, 2017 to June 9, 2017.  The delay was triggered by a memorandum from President Trump that directed the agency ... Read Post
The Top 4 Lies Told by 401(k) Providers After the death of his beloved mother, Harry Houdini was desperate to contact her from beyond the grave with the help of psychic mediums – who claimed an ability to communicate with the dead. Mediums were very popular at the time, but it didn’t take long for Harry to discover they couldn’t do what they promised. Upset, Harry became determined to expose their lies to protect unwitting ... Read Post
401(k) Fees – Frequently Asked Questions by Plan Fiduciaries Small businesses that sponsor a 401k plan have a fiduciary responsibility to only pay necessary and reasonable fees from plan assets. Keeping 401k plan fees in check is one of the most important fiduciary responsibilities because excessive fees reduce investment returns unnecessarily, making a comfortable retirement for plan participants less affordable. Not meeting this responsibility can ... Read Post
401(k) Index Funds – They Make it Easy to Reduce Fiduciary Liability Investment in equity index funds – and other passively-managed investments designed to track a market index – is exploding. According to a Morningstar study, these investments took in a record $504.8 billion in 2016. That’s in contrast to actively-managed funds, which are designed to outperform an index. These funds experienced outflows of $340.1 billion in 2016. Read Post
Finding Hidden 401(k) Fees in Participant Disclosure Notices In a 2015 study of 4,368 retirement plan participants, the National Association of Retirement Plan Participants (NARPP) found that 89% could not correctly calculate their account fees.  Even more disturbing, only 42% knew they were paying fees at all.  Most plan participants – 58% - were unaware that fees were being “automatically” deducted from their account. Read Post
Roth 401k Deferrals — Answers to Common Questions In a 2016 401k plan design study of 2,767 small businesses, we found 66% permit participants to make after-tax Roth deferrals to their personal account. I think it’s safe to assume the high adoption rate of this 401k plan feature is due to participant demand. Read Post
4 Traits of the Best Small Business 401k Providers There are thousands of 401k providers in the U.S. – many with very different fees, services and expertise. This abundance of choice can make choosing a competent 401k provider with reasonable fees seem overwhelming for small business 401k fiduciaries. Read Post
Our Top 10 401k Blogs of 2016: What Topics Were the Most Popular? Happy Holidays from the Frugal Fiduciary! As 2016 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: Read Post
401k Eligibility: When to Let Employees Join Your 401k Plan During the 401k plan design process, we get a lot of questions from small business 401k fiduciaries about employee eligibility.  They want to know when they should let new employees into their 401k plan and their options for keeping certain employees – generally the ones that won’t participate – out. Read Post
401k Plan Design Study: What 2,767 Small Business 401k Plans Are Doing Small businesses can have dramatically different goals for their 401k plan. While some want to maximize key employee contributions, others want to incentivize rank-and-file contributions.  401k fiduciaries have nearly endless options for meeting these goals – many with very different expenses. The process of matching 401k goals to available options is called 401k plan design. Read Post
401k Fees: Are Traditional 401k Services Worth a Smaller Retirement Nest Egg? I have a confession – my company’s participant benefit statements are nothing special.  While they disclose all the requisite information, they are matter-of-fact and lack color graphics.  They’re also delivered electronically, not mailed. Read Post
You Want to Terminate Your Multiple Employer 401k Plan? Good Luck with That Small business 401k plan terminations can happen for reasons other than going-out-of-business or a business sale.  Sometimes, even successful businesses decide to terminate their plan due to a cash crunch or poor employee participation. Read Post
Asset-Based 401k Admin Fees Are Unreasonable; Fiduciaries Should Avoid Them 20 years ago, 401k plans were free. OK not really, but 401k providers used this lie a lot to sell 401k plans to small businesses that didn’t want to pay any out-of-pocket 401k fees. In truth, these plans paid “indirect” fees - like revenue sharing paid by mutual funds and/or wrap fees paid by insurance company variable annuities – to 401k providers based on a percentage of plan assets.    Read Post
3 Questions for Calculating Small Business 401k Provider Fees Small businesses have a fiduciary responsibility to pay only reasonable 401k plan fees. The problem? Too many 401k providers bury their fees in complex disclosure documents. When 401k fees are hard to find, it can be easy for 401k fiduciaries to pay too much for 401k services. When this happens, participant returns are handicapped unnecessarily and fiduciary liability is increased. Read Post
Government Shocker! The 401k Form 5500 May Become Useful Soon   Read Post
Is Human 401k Advice More Expensive Than Robo Advice? You Might Be Surprised A new development in the small business 401k industry is the “robo” 401k provider. These providers use a computer algorithm, instead of a flesh and blood financial advisor, to construct investment portfolios for 401k participants. They claim technology is a less expensive alternative to human advice. Read Post
(Possibly) The Biggest Small Business 401k Fee Study Ever! Meaningful 401k fee data is hard to come by – and that’s a big problem for small businesses. Sponsors of small business 401k plans have a fiduciary responsibility to keep 401k fees reasonable for plan participants. When this responsibility is not met, the consequences for 401k fiduciaries can be severe - including personal liability. Read Post
401k Fiduciary Pro Tip: Uninvested Cash Can Be a Symptom of a Bad 401k Recordkeeper 401k recordkeepers are like icebergs – you can only see a small fraction of the services they provide. Behind the scenes, they can process tens, if not hundreds, of transactions every day for a 401k plan related to contributions, distributions, inter-fund transfers or fee payments. This transaction volume makes 401k recordkeeping complicated, requiring specialized expertise to do it well. Read Post
401k Enrollment: Is a Meeting or E-Delivery Best For Your Small Business 401k Plan? When a small business offers a 401k plan, its employees often need some sort of 401k education in order to make the two primary investing decisions applicable to 401k participation – “how much should I save?” and “where should I invest?” Read Post
The Myth of the 15 Minute 401k Plan Setup Over the past year, several new Internet-based 401k providers have launched in the small business retirement plan market. Led by tech entrepreneurs instead of industry veterans, these providers claim to slash the time it takes to establish a 401k plan using new technology. One says they can deliver a 401k plan in just 15 minutes! Here’s the problem. While technology might speed data ... Read Post
John Oliver Should Be Upset; His Hancock 401k Fees Are Too High! Recently, John Oliver lambasted the 401k industry and his own 401k plan with John Hancock on his HBO show Last Week Tonight. If you haven’t seen this show segment, you should check it out now - it was educational as well as hilarious. John Oliver’s main beef with his company’s John Hancock 401k plan was its annual fees - 1.69% of plan assets + $24/participant – which he considered excessive. Read Post
Safe Harbor 401(k) Plans: Answers To Common Questions “Safe harbor” 401(k) plans are the most popular type of 401(k) used by small businesses today. They automatically pass annual ADP/ACP and top heavy tests and allow business owners to maximize contributions to the plan. To achieve safe harbor status, owners are required to make a contribution on behalf of participating employees. For many employers, that trade-off is well worth the cost. ... Read Post
401k Disclosure Rules Are Out of Date; It’s Time for Common Sense Reform It probably won’t surprise you to learn that government 401k regulations are often inefficient or ineffective. That’s too bad because superfluous regulation generally increases the cost of a 401k plan, which in turn, lowers participant returns. Read Post
What’s Old Is New Again: “Mega Back Door” Roth IRA Contributions Spark New Interest in Old School After-Tax Contributions Ever hear of voluntary 401k contributions? If you are like most people, probably not. They are after-tax employee contributions like Roth deferrals, but subject to different ERISA rules. Voluntary contributions have been around decades longer than Roth deferrals, but are less popular – mostly because their earnings can’t be withdrawn tax-free at retirement like Roth deferrals. Read Post
How to Evaluate 401k Provider Competence in 2 Easy Steps Competence is one of the three top attributes you should consider when shopping for a 401k provider.  Unfortunately, it’s also a difficult attribute to evaluate due to the highly-technical nature of 401k services.  I mean, can you evaluate and measure the quality of 401k nondiscrimination testing, government reporting, participant disclosures, or the accuracy of distribution processing?  ... Read Post
Plan Participation Problems? No Problem You’ve made the decision to establish a 401(k) plan for your small business, but you’re concerned inertia or procrastination will prevent employees from using it. You know many workers think “I can’t afford to save much so there’s no point of saving at all” or “it’s OK for me to postpone savings because I’m not close to retirement.” So how do you overcome these mental barriers or otherwise ... Read Post
What’s the #1 Reason for 401k Lawsuits?  Overpriced or Superfluous 401k Services In my last blog, I wrote the key virtue of the DOL’s new fiduciary rule is that it aligns 401k plan sponsor and financial advisor interests. Once the rule is effective, all advisors will be obligated to act in the sole best interest of 401k participants just like 401k sponsors. Prior to the rule, some advisors could fleece 401k plans without consequences – which often left 401k sponsors ... Read Post
Setting Up A 401(k) Plan: The Cliff Notes Making hasty choices when setting up a 401k can cost your business, or your employees, tens of thousands of dollars in unnecessary plan expenses. For this reason, it’s important you hire a 401k service provider that’s not only reputable, but also consultative. If a provider tells you they can setup your plan in minutes – run. Setting up a 401k plan that matches your company goals simply ... Read Post
The DOL’s New Fiduciary Rule – the Value of 401k Investment Services Will Be More Critical Than Ever On April 6, the Department of Labor finalized its long-awaited fiduciary rule for retirement plan investment advice. Under this rule, all financial advisors to retirement plans are required to act according to a “fiduciary” standard – in other words, they must give impartial investment advice that’s in their clients' best interest. Prior to this rule, only some advisors were subject to a ... Read Post
3 Tax Advantages of 401k Plans 401k plans offer important tax advantages for small businesses and their employees. If you are a business owner, you should understand these benefits when deciding whether or not to offer a 401k plan to your employees. Too many businesses focus on “what is this going to cost me,” rather than, “what are the benefits?” While we strongly recommend always speaking with your accountant on the ... Read Post
Picking 401k Investments and Related Services Is Easy When Fiduciaries Know Their Options When a small business sponsors a 401k plan, several investment-related decisions must be made by fiduciaries. Dramatically different fees and expenses can result from this decision-making, so fiduciaries should know their options in order to make “prudent” decisions on behalf of plan participants – an obligation under ERISA. Otherwise, personal liability can result. Read Post
When ADP/ACP Testing Fails, 401k Fiduciaries Should Understand Their Options Today, most 401k plans operate on a calendar-based plan year cycle. March 15 was an important date for many of these plans – it was the deadline to make any corrective distributions due to a failed 2015 plan year Average Deferral Percentage (ADP) or Average Contribution Percentage (ACP) test in order to avoid a 10% IRS excise tax. Failing an ADP/ACP test is not fun. Highly Compensated ... Read Post
SEC Money Market Reform Will Affect Many Small Business 401ks in 2016; 401k Fiduciaries Should Understand its Consequences Most 401k plans today offer a low risk investment option designed to maintain a constant net asset value. This option is usually a money market or stable value fund. Recently, the Securities Exchange Commission (SEC) made changes to the rules that govern money market mutual funds (MMFs). These changes are intended to increase MMF transparency as well as give investors additional protection ... Read Post
It’s 401k Testing Season! What Small Businesses Need to Know About 401k Testing Each plan year, ERISA requires every 401(k) plan to complete certain tests to confirm they do not discriminate in favor of Highly Compensated Employees (HCEs) or exceed IRS contribution limits. Generally, this annual testing is completed as soon as possible following the close of a plan year. For 401k plans with a plan year that ended December 31, 2015, that means now. While most employers ... Read Post
Small Business Retirement Plan Options: 401ks vs. SIMPLE and SEP IRAs Defined contribution (DC) plans, such as 401(k) plans, are the most popular type of workplace retirement plan in the United States today. According to Department of Labor statistics, there are 633,021 DC plans in the U.S. (516,293 of which are 401(k) plans), covering more than 90 million total participants. Read Post
Shopping For a 401k Plan Doesn’t Need To Be Overwhelming For Small Businesses; A Checklist Can Help In my experience, 401k providers are like snowflakes – no two are alike. Their services can vary dramatically in breadth, depth and price. This variability can make it difficult for small business 401k fiduciaries to select providers with services that match their plan’s needs at a reasonable price. That’s a problem. 401k plans should not pay for superfluous services participants won’t use. ... Read Post
Is Your Company Part of a Controlled Group?  You Need to Know or Risk 401k Plan Disqualification Under the IRS’ controlled group rules, two or more employers with common ownership are considered a single employer for purposes of 401k nondiscrimination testing. These rules often obligate all members of a controlled group to cover their employees with the same 401k plan in order to pass annual coverage testing. It’s very important to pass coverage testing each year – failing can mean plan ... Read Post
Happy Holidays from the Frugal Fiduciary! Our Top 10 Blogs of 2015 Happy Holidays! As 2015 comes to a close, we looked back through this year’s blogs to find the most read. This process was instructive. We learned our most popular blogs were the ones written to simplify 401k administration or fiduciary requirements for employers. You can expect more blogs covering these topics during 2016. So, in case you missed them the first time, or just want a ... Read Post
Understanding a 401k Plan’s Fiduciary Hierarchy Can Make It Easier for Employers To Meet Fiduciary Responsibilities Over the past decade, several high-profile 401k fee lawsuits and DOL efforts to implement a fiduciary standard for professional investment advice have put 401k fiduciary responsibility in the national spotlight.  This attention has done little to help employers understand and meet their 401k fiduciary responsibilities.  Most employers are still confused and risking personal liability if 401k ... Read Post
Good News, 401k Fiduciaries! DOL Fee Disclosure Rules Make ERISA 404(c) Compliance Simple During the 4th quarter of each year, most 401k sponsors are distributing notices to participants that disclose certain plan information about the upcoming year – the safe harbor 401k notice is an example. Most sponsors try to coordinate the distribution of these notices with their plan’s annual fee disclosure notice, which is required under ERISA 404a-5 (“404a-5 notice”). The 404a-5 notice ... Read Post
Managing 401k Deadlines for the 2016 Plan Year – A Checklist Can Help A myriad of tasks must be completed each year to keep a 401k plan in compliance with ERISA. When considered together, ERISA compliance tasks can seem overwhelming to a 401k plan sponsor. When they are unpacked, however, it’s clear they are manageable - especially when you consider many of the more difficult and time consuming tasks may already be handled by a professional Third-Party ... Read Post
401k Plan Design – Our Checklist Can Make the Process Simple There is no such thing as a “one size fits all” 401k plan. Why? Employer goals for a 401k plan can vary greatly. Some employers want to maximize owner contributions at the lowest overall cost while others want to incentivize employees to save a portion of their paycheck for retirement. The process of matching 401k specifications to employer goals is called plan design. There are 6 major ... Read Post
Selecting 401k Service Providers: Determine the Professional Help You Need Before You Shop Selecting competent service providers is the most important - and most confusing - fiduciary duty of a 401k sponsor. Why? Services offered by 401k providers can vary dramatically in breadth, depth and price. This variability makes it difficult for 401k sponsors to match appropriate services to plan needs. Many small business 401k plans pay for superfluous services participants do not use. ... Read Post
401k Document Retention Rules Made Simple Did you know that ERISA requires all employers to retain detailed 401k documents, including testing results, transactions and employee activity – for at least 6 years? If you did not, you’ve got a lot of company. Nevertheless, it’s important to understand and comply with these rules. While only small civil penalties are possible if required plan records are not preserved, missing records can ... Read Post
The Federal TSP Is a Baseline for 401k Plans – And Any Small Business Can Match It Last week, the Investment Company Institute (ICI), a financial industry association representing mutual fund managers, published a “research” paper about the TSP, titled The Federal Thrift Savings Plan: Can It Be Duplicated? In it, the ICI says the TSP “is often portrayed as a standard for all participant-directed retirement plans…the TSP is a unique arrangement that cannot be compared with ... Read Post
401k Fiduciary Outsourcing: Does it Actually Increase an Employer’s Fiduciary Liability? Last month, the DOL held 4 days of hearings regarding its proposed fiduciary rule. During these hearings, service providers, industry groups and academics shared their thoughts regarding the DOL proposal. Some of the most colorful testimony was given by Don Trone, a man some people call the “Father of Fiduciary.” Read Post
Avoiding 401k Fiduciary Liability Doesn’t Need to Be Difficult; Simple “Best Practices” are the Key My favorite guiding principle is Occam’s razor, which defines as “the maxim that assumptions introduced to explain a thing must not be multiplied beyond necessity.”  I don’t know many 401k professionals that value Occam’s razor as much as I do.  In fact, I think many actually favor overwrought and overly expensive solutions to 401k issues.  I guess this probably makes a lot of ... Read Post
VC-Backed 401k Startups: A Paradigm Shift or Flash in the Pan? This year, three Internet-based companies joined the retirement plan services industry – Honest Dollar, ForUsAll and Captain401.  These startups are noteworthy because they weren’t founded by career retirement plan professionals. Instead, they were founded by Silicon Valley entrepreneurs backed by Venture Capital (VC) investors.  Read Post
Will Trial Lawyers be the Sole Beneficiary of a Watered-Down Fiduciary Rule? The law firm of Schlichter, Bogard & Denton has had a very good couple of weeks. After winning two high profile 401k fee lawsuits, courts have approved the payment of more than $31.9 million in legal fees. The defendants in these cases were Lockheed Martin Corp and Ameriprise Financial, fiduciaries of their respective 401k plans. The plaintiffs, represented by Schlichter, were 401k ... Read Post
A Common Sense 401k Reform - Retirement Labels and Receipts According to a National Association of Retirement Plan Participants (NARPP) survey of 4,368 active retirement plan participants, 58% said they didn’t know if they’re paying account fees. Of the participants who know they pay fees, only one in four (26%) could accurately calculate fees. In other words, fewer than 11% could correctly identify and calculate the fees being paid from their ... Read Post
Clarity in a Complex World? A 408b-2 Review I look at a lot of 401k service provider fee (408b-2) disclosures.  At least 2 per week. Some are excellent and straight forward, while others are as clear as mud.  This is a problem for 401k fiduciaries.  It’s their responsibility to ensure their 401k plan only pays reasonable plan expenses.  When 408b-2 disclosures are unclear, satisfying this responsibility becomes more difficult. Read Post
The DOL’s Fiduciary Rule: Why Can’t Regulators do Simple? Since the DOL released its fiduciary proposal, I’ve been trying to digest it so I can provide any concerns to the DOL during their comment period.  This has not been an easy task.  The DOL’s proposal is complex.  My review got me thinking about DOL regulations in general – why aren’t they less complicated? I think they can be, being more effective in the process.  Read Post
401k Participants Should Leave Investing to the Pros; Focus on Saving Saving for retirement is one of the most important things we must do during our working years.  After all, nobody can work forever and living expenses don’t stop after you stop earning a paycheck.  And yet too many of us aren’t saving enough for retirement.  Why is that?  For workers that can afford to save, I think the number one reason is the inability to cut through the complexities of ... Read Post
Is Conflict-Free Investment Advice More Expensive than Conflicted Advice? Critics of the DOL’s proposed fiduciary rule, also known as the "conflict of interest rule for investment advice," argue that the rule will make investment advice too costly for many 401k plans. If the critics are right, this issue would be a compelling reason to scuttle the rule – studies have shown that professional advice can help 401k participants increase investment returns. An Aon ... Read Post
“Bundling” 401k services with other corporate services can result in fiduciary liability I am a sucker for a deal.  As such, I’m an easy target for companies that offer “bundled” products and/or services.  I mean, lower prices on items I would otherwise buy a la carte - yes, please! For example, when I buy fast food, I always order a “value meal” that includes a burger, fries and a drink – instead of buying these items individually – to save money. When I shop for cable ... Read Post
Watered-Down Fiduciary Rule May be the Best Case Scenario for Investors On April 14, 2015, the DOL proposed its long-awaited fiduciary rule designed to protect retirement plan savers from conflicted investment advice. A fiduciary rule was originally proposed in 2010, but it was withdrawn the following year in response to industry opposition. The stakes are high. According to a White House Council of Economic Advisers analysis, conflicts of interest cost ... Read Post
Online 401k fee analyzers are a marketing gimmick; fiduciaries and participants should avoid them Last year, we wrote an article about a growing number of websites that claim to use technology to help sponsors or participants understand or uncover 401k fees. At the time, we were not fans of any of these sites. We wrote “To fill the gaps in the two DOL fee regulations, private company websites have begun to spring up to meet the underserved needs of sponsors and participants. I try to ... Read Post
Beware of Surrender Charges and Other Extraordinary 401k Fees Charged by Insurance Companies If your retirement plan’s service provider is an insurance company, there is a good chance your investment options are variable annuities and not mutual funds.  If this is the case, it’s important to understand how variable annuities are different than mutual funds – it can be easy to confuse the two.  Not understanding the differences between mutual funds and variable annuities can result ... Read Post
Jerry Schlichter Interviewed by Frontline; 401k Sponsors Should Take Note Last week, Frontline published an article as a follow-up to its 2013 documentary “The Retirement Gamble.” That documentary painted a picture of a retirement industry mired in hidden fees and conflicts of interests. In the new article, Frontline interviewed Jerome Schlichter, a St. Louis attorney specializing in suing plan sponsors for excessive 401k fees. Over the years, Schlichter has ... Read Post
DOL’s Fiduciary Rule Advances to OMB; Not Everyone is Happy about It On February 23, 2015, President Obama announced that the long-awaited redrafting of the DOL’s “fiduciary rule” was being submitted to the Office of Management and Budget (OMB) for review. This rule, also called the “conflict of interest rule for investment advice,” would subject all financial advisors who provide investment advice to retirement plans to a fiduciary (conflict-free) standard ... Read Post
Target Monthly Income and not an Account Balance When Saving for Retirement Most people consider $100,000 a lot of money – I do anyway. But is it a lot of money when you’re saving for retirement? The short answer is it depends upon how old you are. A 30 year-old with a $100,000 nest egg is likely on track for a comfortable retirement at age 65 if they’re saving 10%-15% of their income each year, while a 50 year-old with the same nest egg is likely behind in their ... Read Post
Evaluating 401k Providers: Separating Commodity from Value-Added Services Selecting competent service providers is one of the most important fiduciary duties of a 401k plan sponsor – and it can appear daunting at first glance. Fortunately, this process can be made much simpler by understanding each service that makes up a 401k plan and applying appropriate benchmarks to those services to measure their value. Once you’ve done that, you’re ready to pick 401k ... Read Post
NAPA stakes a position against the DOL’s fiduciary rule This month, the DOL is expected to propose a “fiduciary rule” for financial advisors that provide investment advice to retirement plans. This rule, also called the “conflict of interest rule for investment advice,” would subject brokers to the same fiduciary obligations as investment advisers. The DOL proposed a fiduciary rule in 2010, but that proposal was withdrawn in 2011 under heavy ... Read Post
Keeping my Fingers Crossed for 401k Reform in Tonight’s SOTU Address President Barack Obama will give his State of the Union address at 9 p.m. Eastern tonight. During this speech, he is expected to propose reforms to our private retirement plan system. If he does, it will be second year in a row the president addressed retirement plan reform. Last year, the president created the myRA, a new type of retirement account. If you read my last blog, you know I am ... Read Post
MyRAs are not the answer for expanding retirement plan coverage   In his 2014 State of the Union address, President Obama directed the U.S. Treasury Department to create a new type of savings account for Americans. The myRA—short for “my Retirement Account”—is designed to be a starter account for workers who aren’t covered by a workplace retirement plan. Read Post
New Year’s Resolution # 1 for Fiduciaries – “I WILL Evaluate My 401k Plan Fees" I have always liked New Year's resolutions. They are a great excuse for ending bad behaviors or starting good ones. Here’s one for all small business 401k sponsors – “I will evaluate my plan fees for reasonableness.” Let me explain why… Read Post
JP Morgan publishes a piece on choosing target date funds for your plan. Good points made, but even better points are left out. I welcome this “Retirement Insights” piece from J. P. Morgan Asset Management – as far as it goes. The piece makes several excellent points that can benefit all plan sponsors, but presents a view biased toward active management. No surprise. JP Morgan actively manages retirement plan investments – they have a point of view that ultimately promotes the company’s business and brand. Read Post
There are no “economies of scale” in 401k plans – unless you are trying to beat the market Any 401k plan sponsor in America – repeat ANY – can buy market returns dirt cheap. There are no economies of scale in the market for indexed investments. No minimum purchase requirements. No high pressure sales pitches. Buy an index mutual fund or ETF and you’ve locked in market returns. As I have written previously, this indexed approach is the new baseline for small business 401k plans. Read Post
Multiple Employer Plans (MEPs) are a marketing play, not a way to cut costs. We don’t need them. MEPs & Lobbying Read Post
Reforming Roth provisions may be key to improving savings rates for Millennials. My proposal. Roth 401k & Millennials Read Post
Let’s put “Income” back in ERISA ERISA Read Post
MassMutual settled its “functional fiduciary” lawsuit – a cause for hope for greater fee transparency. Functional Fiduciary Lawsuit Read Post
Small business owners are redefining the market for 401k plans. Result: Mass market “products” are about to go extinct. Small Business 401k Plans Read Post
Edison International case highlights a needed reform: Share class restrictions in 401k plans. 401k Plans Read Post
Hiring an ERISA 3(38) Investment Manager can be the simplest way to limit 401k investment liability. 401k Investment Liability Read Post
Financial wellness is impossible to achieve without plan participation. Here’s how to address the issue with your employees. Financial Wellness Read Post
Why small business retirement plans with high asset balances actually pay more for their plan services. Small Business Retirement Plans Read Post
Vanguard’s John Bogle makes his case for improving 401k plans. Here’s why his Senate testimony rocks. John Bogle, C-SPAN Read Post
Senate Finance Committee holds a hearing today on “Retirement Savings 2.0.” Here is what they should address to help small business retirement plans. Small Business Retirement Plans Read Post
Brokerage Windows in 401k Plans: Nope. Not even if they say “pretty please.” With Hurricane Sandy bearing down on New Jersey in 2012, Governor Chris Christie memorably took to the airwaves. “Get the hell off the beach!” he scolded the stragglers who did not take the storm threat seriously. I feel the same way about brokerage windows within 401k plans. They are risky, potentially very expensive and appropriate for only a very small fraction of 401k investors. Don’t ... Read Post
The Power of The “All-In” 401k Fee   Each time I buy a new car, I get frustrated by the number of variables that affect the total price of a car – discounts, trade-in value, taxes, tag fees, dealer prep, etc. For me, it’s simply easier to start with a total price – the “all-in” price - and then work backward to price each of the itemized fees. That way, I know my total car purchase expense up front and can compare it dealer ... Read Post
Former DOL Deputy Director declares scandal in IRA rollovers. It’s a scandal, just not the one he thinks it is. IRA Rollovers Read Post
New companies are trying to fill the gaps in 401k fee disclosure regulations. Here’s why they all fall short. Plan re-enrollment Read Post
Plan re-enrollment: The “Wonder Drug” for your company’s retirement plan. It’s cheap, simple and benefits sponsors and employees. Plan re-enrollment Read Post
Former Obama administration official offers a plan to “fix” the tax incentives for retirement plans. Here is why it is dead wrong. Small Business Retirement Plans Read Post
In small business retirement plans, the employees with the smallest balances need the most help. Here’s my frugal guide to making the plan work for everyone in your organization. Small Business Retirement Plans Read Post
Revenue sharing is on the decline in 401k plans. Three reasons why it will soon be gone altogether. Revenue Sharing Read Post
GAO suggests changes to the Form 5500 to promote clarity and consistency. We agree. GAO suggests changes to the Form 5500 Read Post
Low-cost target date index funds will fundamentally reshape the market for small business retirement plans – and soon! Reshaping the market for small business retirement plans Read Post
Wall Street Journal article proposes sweeping changes to improve small business retirement plans – including simplifying fee disclosures and requiring index funds. Here’s our analysis. Photo credit: WSJ Live Read Post
Employee Fiduciary Announces Free 401k Fee Comparison Service Service intended to help small businesses take current DOL fee disclosure regulations a step further. Read Post
Indirect compensation in small business retirement plans made a lot of sense in 1980. So did leisure suits. It’s time to move on. Photo credit: Leisure Suit Convention, by Liftarn Read Post
Small business 401k participants using their 401k plans to save for retirement (!) Part 3 of 3 Small Business 401k Plan & Unconventional Wisdom Read Post
Here’s how our small business 401k plan clients use low-cost investments. Not the conventional wisdom. Part 2 of 3 Small Business 401k Plan & Unconventional Wisdom Read Post
The Small Business 401k Plan in 2014: Our Clients Redefine the Conventional Wisdom - Part 1 of 3 Small Business 401k Plan & Conventional Wisdom Read Post
Industry heavyweight SPARK weighs in on 408(b)(2) fee disclosure reform. We take issue with their key point. SPARK Weighs in on 408(b)(2) Read Post
ERISA Section 404(c) turns forty this year. Here is a common sense proposal for meaningful reform. ERISA Section 404(c) Read Post
The DOL asked for input on enhancing its 2012 fee disclosures rules and talking real change. Here are our suggestions on getting it done. DOL, Employee Benefits Administration (EBSA) Read Post
Yale law professor again hammers high fees and revenue sharing. With a few reservations, I like what they have to say. Professor Curtis, Professor Ayres Read Post
A Good Try from Congress, but Multiple Employer Plans are not the answer. Multiple Employer Plan is Not the Answer Read Post
New Year’s resolution: Be a better fiduciary to my plan. New Year's Small Business 401(k) Plan Resolution Read Post
Retirement readiness begins by getting organized. Here are some great free tools. Get Organized for Retirement Readiness Read Post
Retirement readiness? Even with a great 401k most will have to work hard to retire well. Retirement Readiness, Keep Working Hard Read Post
Press spins industry “research” puff piece into a retirement crisis denial story. Allow me to retort. Small Business 401k Plans and Retirement denial? Read Post
Schwab’s CEO embraces passive management. And Fidelity confirms a trend. Tipping point? Passive Management for Small Business 401k Plans Read Post
Consulting giant produces “Seven Little Pages of Retirement Plan Wisdom.” It is a must read. Wisdom for Small Business 401k Plans Read Post
Mandatory 401(k) Participation. Trending? (I hope not.) Mandatory 401k Read Post
Let’s go shopping! For a 401k plan? I get frustrated reading that high quality, low cost 401k plans are not the norm for small businesses. I think this opinion is the result of too many small business owners who don’t bother to shop the market for 401k plans. Read Post
Uncooked Pizza and the Low Cost 401K Plan, Part 2 of 2 Uncooked Pizza and the Low Cost 401k Plan Read Post
The “Take and Bake Revolution” Comes to the 401k, Part 1 Take and Bake Revolution, Innovative 401k Plans Read Post
Guess what percentage of ETF assets are actively managed? ETF Assets Read Post
Going “Bold” on Safe Harbor Plans Safe Harbor Plan Read Post
Form 5500: The Form that Needs Reform Image courtesy of Stuart Miles at Read Post
The Two-Headed Monster, Fairness and Safe Harbor Plans Image courtesy of Marcus at Read Post
“Amateur Hour”? Professor makes waves with Form 5500 study Image courtesy of Luigi Diamanti at Read Post
Life After the 401k Fee Disclosure Rule Image courtesy of Stuart Miles at Read Post
The ETF moment? Image courtesy of cooldesign at Read Post
In Praise of the 401k Employer Match Image courtesy of kibsri at Read Post
Self-directed investing in 401ks: Paternalism or Freedom? Image courtesy of watcharakun at Read Post
401k Investing: Trends Image courtesy of dream designs at Vanguard’s blog recently featured a post titled, "The Adoption of a Great Idea." The post highlighted several technological advances that have improved our standard of living over time and posited the theory that well-diversified, low cost portfolios are poised to be the next big thing. It’s a great thought-starter on investment trends ... Read Post
Follow the Money on 401k Fee Disclosures Image courtesy of digitalart at I recently read a story on titled, “401k Disclosures Not Working For Investors.” The article made the point that participant fee disclosures are at best confusing, and at worst, completely ignored. Friends, it should come as no surprise that I am in favor of more 401k fee disclosures, presented with total clarity. As I ... Read Post
Bookmark This: 12 401k Articles for Your Holiday Weekend Reading Image courtesy of It’s hard to believe, but Memorial Day weekend is almost here. It’s a great time to catch up on the reading you’ve been meaning to do -- particularly reading on retirement issues. I’ve pulled together some of the best 401(k) articles I’ve recently read to give you a jump start. These are great thought-starters whether you’re a small business owner ... Read Post
We Got What We Asked For - Now Let’s Ask for Low Cost 401k Plans Image courtesy of I’m reading a great book called “Salt Sugar Fat: How the Food Giants Hooked Us,” by Michael Moss. You’re probably wondering how a book like this relates to low cost 401k plans. I think you’ll see the parallels shortly. Moss’ basic premise rests on the idea that large corporate interests use high amounts of fat, sugar and salt to sell us large ... Read Post
Keep 401k Plan Costs Down: Bogle Interviewed on PBS’ “Frontline” Trying to keep 401(k) plan costs down is a major focus of our work at Employee Fiduciary. Our job is to get your savings invested in the market efficiently – think of us as a pipeline to the market. The less leakage in that pipeline, the better for participants. I was glad to see PBS air a Frontline program on the problems with 401ks. “The Retirement Gamble” addressed the real and growing ... Read Post
The 30 Minute Rule: Self-Directed Investing in Your 401k Image courtesy of samuiblue at Recently, the New York Times Dealbook ran a piece on bitcoins which featured two of the Frugster’s favorite capitalism characters, Cameron and Tyler Winklevoss (who?), better known by their Zuckerbergian nickname “the Winklevii.” If you’re like me, you might be wondering what a “bitcoin” is. Good question. I’ve spent about an hour on the ... Read Post
What You Ought to Know About 401k Fiduciary Responsibility Image courtesy of Stuart Miles at Hello, friends! Apologies for my absence last week. I was traveling abroad (frugally, of course), holding an umbrella in various Italian cities. Although I was an ocean away, I noticed several versions of the same story popping up in my 401k news alerts. Each story got me thinking about what everyone ought to know about the fiduciary ... Read Post
The “Plug and Play” 401k 401k plans have a way of intimidating small business owners. Maybe it’s because of their tax code name. Maybe it’s because of the perception that 401(k) plans are complex and time consuming - taking away from their core business. I think it’s all this and more. One thing is for certain though: it’s time to demystify the 401(k) plan and start looking at it as it really is - a commodity. ... Read Post
Two Tips on 401k Fees and Investments Master isolated images / As readers of this blog know, I get pretty fired up about 401k fees. Fees are the enemy of frugality. And often, they lay low, lurking in the fine print and counting on investors to overlook them when making important investment decisions. Recently, the Department of Labor came out with a great publication titled, “Maximize Your Retirement ... Read Post
Make Saving Simple: Automatic 401k Enrollment I've always disliked the popular interpretation of the Tortoise and the Hare fable. Slow and steady wins the race, my eye! The tortoise did all that he could. The hare took a nap and barely lost. My interpretation – use your talents (and resources) frugally and you will get the best result possible. If the hare had appropriate incentives… Let's take the unlikely leap to 401k participation ... Read Post
401k Testing and Compliance: Is a Safe Harbor Plan Really Frugal? At Employee Fiduciary, March is a busy month. And no, I’m not talking about putting together our NCAA brackets. Corporate tax returns are due March 15, which means we are helping our clients analyze the deductibility of 2012 contributions. We are busy completing 401k plan testing and compliance. In a perfect world, all employees would make the maximum contributions to their plan and reap the ... Read Post
How and When to Offer Your Employees Self-Directed 401k Investments Small business owners have a lot on their plates. Offering a 401k plan to employees is just one of many things they must consider doing when attempting to attract and retain talent. But many companies have employees of all ages, investment knowledge and risk tolerance. How to make the best choice for all? I believe offering a self-directed brokerage investment option in your 401k plan can ... Read Post
Boring is Good: Index-Based Target Retirement Funds Why Small Companies Choose Vanguard Funds We all want to be the apple of someone’s eye. But when it comes to your 401k, most investment companies simply focus on the love they have for your wallet. Read Post
Interstate 401k -- A Road Map to Comprehensive Employee Benefits Friends, today I’m posting from Disney World of all places. You might wonder why in a sea of Mickey ears I’m thinking about comprehensive employee benefits, but I’m finding some interesting parallels between visitors to the Magic Kingdom and small business owners trying to do right by their employees. Read Post
Myth Busting: 401k Plan Consultations You Don’t Need a lot of Money for a Great, Low Cost 401k Plan You’ve probably seen the Discovery television show MythBusters. Two highly intelligent, slightly crazy guys and their team of hipster scientists test common myths, often by literally blowing stuff up. Today we will adopt that approach to a “401k plan consultation” episode, wherein the Frugal Fiduciary (that’s me) blows up the #1 ... Read Post
Don't Suffer Losses From Excessive 401k Fees There's been a lot of news lately about the effects of concussions on NFL players. Even though it is not nearly as important, it got me thinking of the parallels for those of us with 401(k) plans. Read Post
401k Portability like College Coaches The end of the college football season is the beginning of the college coaching carousel. The frequent movement of college football coaches and their staffs from one school to another, or to the pros, is the cause of consternation among players, students, administrators, and alums. Sorry Oregon! But by giving coaches the freedom to find the settings that they feel best complements their ... Read Post
You Get What You Pay For (Even If You Don’t Need It) In Monday’s post, I wrote about the dangers of picking a 401k provider based on brand name only. We left off at the point where the buyer has decided on the investment options best for them and has a few low-cost providers under consideration. Let’s consider the trade-off between fees and services. Read Post
The 401k Cart It’s commonly accepted that the beginning of a new year presents the opportunity to resolve to do things differently. For some folks that means fewer cupcakes, more frequent trips to the gym, or the classic resolution to save more and spend less - Federal government excepted. As Employee Fiduciary is in the 401k biz, allow me to suggest this resolution: Stop putting the 401k cart before the ... Read Post
Welcome to Employee Fiduciary’s Blog Employee Fiduciary has been a quiet company, but with all of the changes to the 401(k) industry - and not all for the better - it’s time we make ourselves heard. Read Post