The Frugal Fiduciary Small Business 401(k) Blog
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401(k) providers can charge “direct” and/or “indirect” fees for delivering plan administration services such as asset custody, participant recordkeeping, Third-Party Administration (TPA), and professional investment advice. The difference between the fees is how they are paid. Direct fees can be paid by the plan sponsor or deducted from participant accounts, while indirect fees increase the cost of plan investments – reducing their returns. If you’re a business owner, I strongly recommend you avoid indirect fees for two reasons – 1) they lack the transparency of direct fees – which makes excessive 401(k) fees harder to avoid and 2) they could limit your access to top 401(k) investments - which often pay no indirect fees.
Happy Holidays from the Frugal Fiduciary! As 2020 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: Plan design – Basics about popular 401(k) features, including the factors business owners should consider when evaluating them for their plan. Plan establishment – The differences between popular retirement plan types, including the tax credits and deadlines for establishing either plan. Plan administration – The major 401(k) plan administration tasks, including their deadlines for completion. Plan legislation – Summaries of major retirement plan legislation that took effect in 2020, including the SECURE and CARES Acts.
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If you have questions about Transamerica 401(k) fees – how they work, how much they cost on average, or how you can find & calculate them for your plan – you’ve come to the right place. In this guide, we’ll show you how to calculate the full cost of a Transamerica 401(k) plan using their DOL-mandated fee disclosure.
For nearly 10 years, the financial services industry lobbied Congress to permit “open” Multiple Employer Plans (MEPs) – a form of 401(k) plan that can be adopted by multiple unrelated employers with no association at all. They got what they wanted in 2019 when the SECURE Act created Pooled Employer Plans (PEPs). Supporters claim PEPs can offer lower fees for retirement savers and greater liability protection for business owners than a single-employer 401(k) plan (SEP). I think a SEP with leading index funds and flat administration fees will beat PEPs on both fronts.
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 plan administration tasks each year. It’s ultimately up to employers to ensure each task is completed timely. Meeting this important fiduciary responsibility can seem overwhelming, but it doesn’t need to be. The key is hiring a 401(k) provider that’s willing and able to do three things - 1) summarize all required tasks, 2) complete the more difficult and time-consuming ones, and 3) provide straightforward direction for completing the rest.
On October 27, the Ways and Means Committee Chairman Richard E. Neal (D-MA) and Ranking Member Kevin Brady (R-TX) introduced the Securing a Strong Retirement Act of 2020 to “help a greater number of Americans successfully save for a secure retirement.” In general, I like this bipartisan bill – which builds upon the SECURE Act of 2019. My favorite provision would require 401(k) plans to benchmark the investment returns of Target-Date Funds (TDFs) based on Department of Labor (DOL) standards.