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.
401(k) plans must operate according to the terms of a written plan document to meet IRS qualification requirements. Most plans use an IRS “preapproved” document for this purpose. These 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 of 2006. A new cycle - called "Cycle 3" or "Post-PPA" - opened last year. From August 1, 2020 to July 31, 2022, all pre-approved 401(k) plans must be restated onto a post-PPA document.
Each year, 401(k) plans must pass certain IRS-mandated nondiscrimination tests to confirm Highly-Compensated Employees (HCEs) do not disproportionately benefit and no IRS contribution limits are exceeded. These tests are often completed soon after the close of the year so test correction and tax deduction deadlines are not missed. For calendar-based 401(k) plans, that means now.
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.
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.
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.
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.
Providers of Multiple-Employer 401(k) Plans (MEPs) – a form of 401(k) plan co-sponsored by two or more unrelated employers - have had a rough time in the courts in recent months. Three providers - ADP, Pentegra, and TriNet - have been accused of charging excessive 401(k) fees, while two others – Insperity and National Rural Electric Cooperative Association (NRECA) - have paid out tens of millions of dollars in restitution. Because providers usually market MEPs as a lower-cost alternative to single-employer 401(k) plans, these lawsuits can seem surprising. I’m not surprised one bit.