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Everything looked okay in the company 401k…employees weren’t complaining…but the executives couldn’t contribute enough to the plan, and the owner wasn’t sure how to assess the plan that they were annually contributing well over six figures into. His adviser was always up for lunch, and while he couldn’t put his finger on it, their annual reviews seemed lacking.

The owner was a friend of one of our client’s whose 401k profit sharing plan we provide services to, and they suggested he reach out to us for a review.

Using our benchmarking process, our research uncovered some strong points and some deficiencies.

Here’s what we found: The well-respected investment provider they selected provided comprehensive employee and employer websites and strong administrative service. The 401k plan design was pretty straight forward. Rank and file participation was low and so the plan often failed top heavy rules limiting what the executives could contribute. Even worse, these highly compensated employees often had their deferrals returned, reducing their retirement savings and creating unexpected income taxes.

We benchmarked the investment line-up, which was comprised of 80% of the provider’s proprietary funds that scored lower in our comparison than other options available in that same plan.

We also benchmarked the fees which were high compared to peers in our comparison.

The employer hired us to provide plan support, and the transition was seamless for both HR and the employees.

Here were the results:

Our research indicated that their current provider had all the elements to work towards having a successful plan, but the advisor wasn’t taking advantage of those resources.

Plan design: To seek increased rank and file participation, we helped the plan sponsor work with the provider to add automatic enrollment, so that new employees would be enrolled unless they chose to opt out. We recommended adding automatic escalation, so each year when the employees got their pay raise, their deferrals increased too.

Investment line-up and fees: We recommended the replacement of proprietary target date funds with a more suitable line-up. We also helped them replace several underperforming funds.

We helped the plan sponsor negotiate a significant fee reduction with the provider which was passed on to the employees.

Employee education: We mapped out a combination of lunch and learn meetings and webinars geared toward helping employees become “retirement ready.” The webinars helped include out of state employees. We even had pizza delivered to offsite locations.

Investment Fiduciary Support: We became an investment fiduciary on the plan to reduce the employer’s fiduciary exposure.

Now the employees can work towards saving more and have lower fees, the executives are able to contribute more, and the employer values their “smart way to 401k!”

This case study is provided for illustrative purposes only. Results may vary significantly based on your individual situation.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

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