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Small Business 401(k) Blog

The Frugal Financial Small Business 401(k) Blog

Get the latest industry news, deadlines and tips you need to know to help tackle your fiduciary responsibility needs.

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Investments | Financial Advice

401(k) Index Funds – They Make it Easy to Reduce Fiduciary Liability

By: Eric Droblyen
February 22nd, 2017

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.

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Investments | Provider Shopping | Financial Advice

Picking 401k Investments and Related Services Is Easy When Fiduciaries Know Their Options

By: Eric Droblyen
April 6th, 2016

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.

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401(k) Plan Design Checklist

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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.

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Fiduciary Responsibiilty | Investments

SEC Money Market Reform Will Affect Many Small Business 401ks in 2016; 401k Fiduciaries Should Understand its Consequences

By: Eric Droblyen
March 9th, 2016

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 during periods of extraordinary market stress, when redemptions in some MMFs can increase significantly. These changes are effective October 14, 2016.

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Fiduciary Responsibiilty | Investments

Good News, 401k Fiduciaries! DOL Fee Disclosure Rules Make ERISA 404(c) Compliance Simple

By: Eric Droblyen
December 2nd, 2015

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 discloses certain plan expenses (administration, individual and investment-related) to 401k participants. First required in 2012, its purpose is to help 401k participants make informed plan choices.

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Fiduciary Responsibiilty | Investments | Provider Shopping | Financial Advice

Selecting 401k Service Providers: Determine the Professional Help You Need Before You Shop

By: Eric Droblyen
October 21st, 2015

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. These excess services are often expensive, dragging down participant investment returns and creating potential personal fiduciary liability for the 401k sponsor. If you sponsor a 401k plan, I recommend following a two-step process to ensure your plan does not pay fees for services your participants will not use: 1) understand the services that compose a 401k plan and 2) determine which of these services require professional assistance to deliver. Once this process is complete, you’ll be ready to shop for professional service providers.

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Investments

The Federal TSP Is a Baseline for 401k Plans – And Any Small Business Can Match It

By: Eric Droblyen
September 23rd, 2015

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 or duplicated by 401(k) plans.” This is empty rhetoric from a group representing companies that would lose revenue if more 401k plans adopted a TSP-like investing approach. Small businesses can absolutely have a 401k plan similar to the TSP. And I’m happy to explain how.

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