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.
Multiple Employer Plans | Provider Shopping
By:
Eric Droblyen
May 11th, 2022
While 401(k) plans must be established with the intention of continuing indefinitely, the IRS does allow employers to terminate their plan when it no longer suits their business needs. Terminating most 401(k) plans is a straight-forward process. A notable exception is Pooled Employer Plans (PEPs) – a form of “open” Multiple-Employer Plan that pools the 401(k) assets of unrelated employers. This distinction can impose serious hardships on plan participants.
Provider Shopping | Thought Leadership
By:
Eric Droblyen
April 27th, 2022
On March 29, 2022, the U.S. House of Representatives passed the Securing a Strong Retirement Act – better known as SECURE Act 2.0 because it builds upon the Setting Every Community Up for Retirement Enhancement (SECURE) Act. I support SECURE Act 2.0 generally but am disappointed the bill doesn’t offer any 401(k) transparency reform. Today, 401(k) plans can be a black box of hidden fees and conflicts of interests. This lack of transparency can make it impossible for employers to offer their employees a cost-efficient 401(k) plan.
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Provider Shopping | Thought Leadership | Fiduciary Responsibility
By:
Eric Droblyen
April 13th, 2022
401(k) conflicts of interest misalign the interests of employers and 401(k) providers. While employers have a fiduciary responsibility to choose a 401(k) provider with “reasonable” administration fees and cost-efficient investments to make retirement as affordable as possible for plan participants, conflicted 401(k) providers have a financial incentive to push overpriced administration services and investments when lower-priced - but otherwise comparable - alternatives are available. How do conflicted 401(k) providers get away with it? Often by spinning a conflict as a benefit.
401(k) Fees | Provider Shopping | Fiduciary Responsibility
By:
Eric Droblyen
March 16th, 2022
Cost matters a lot when saving for retirement. When paid from plan assets, 401(k) fees reduce the account returns of plan participants dollar-for-dollar. Over decades, these losses can cost a 401(k) account hundreds of thousands of dollars in lost compound interest. Given the stakes, employers have a fiduciary responsibility to pay only “reasonable” 401(k) fees from plan assets. When this responsibility is not met, business owners can be held personally responsible for restoring excessive fee payments.
Multiple Employer Plans | Provider Shopping
By:
Eric Droblyen
February 16th, 2022
In 2019, the SECURE Act created Pooled Employer Plans (PEPs) – a form of “open” Multiple-Employer Plan that pools the 401(k) assets of multiple unrelated employers. Supporters claim PEPs can offer lower fees for plan participants and greater liability protection for plan fiduciaries than a traditional single-employer 401(k) plan (SEP). In truth, a SEP with an investment menu of leading index funds and flat administration fees can usually beat a PEP on both fronts.
401(k) Fees | Retirement Planning | Provider Shopping
By:
Eric Droblyen
January 5th, 2022
The conventional wisdom about 401(k) fees is that participants in small business plans pay higher account fees than participants in “mega” plans sponsored by large corporations. In truth, a small business can help their participants pay less by paying all 401(k) administration fees from a corporate account. Why would a small business owner incur this expense when they can pay the fees from plan assets - like most large corporations do - instead? To grow their personal 401(k) account faster while lowering their taxable income.