There is a common misconception that safe harbor plans are exempt from testing requirements. This overly general and inaccurate statement calls for a proper explanation. A safe harbor plan requires tests other than non-discrimination, entails proper administration to satisfy the plan design and can benefit from testing for plan optimization.
As a financial advisor, you will need to decide which TPA (third-party administrator) to partner with, when managing your client's 401(k) plan. As you are determining which provider to use, it is important to understand the distinct roles within the plan and how your partnership decisions could impact your client’s experience.
Financial advisors and retirement plan consultants work together with business owners and plan sponsors to develop qualified retirement plans that address the specific objectives of the owners and key executives. The retirement plan consultant may conduct an annual projected contribution analysis for an existing plan to determine if the defined contribution plan design (401k and/or profit sharing type) allows for contributions that would benefit the owners/partners on a tax deductible favorable basis.
What does it mean when fees are assessed "pro-rata"? The pro-rata method of assessing a fee is when the total fee amount is deducted proportionally from participant accounts. In terms of fee fairness, pro-rata fees will ensure that all participant fees are reasonable based on their account balance. In terms of fee clarity, a participant will never be able to verify or calculate their pro-rata fee, since they are only aware of their individual account balance and not the balances of other participants.
For many years, plan sponsors have wrestled with the decision to offer loans to their plan participants. Some consider them to be a benefit and even promote them as a legal way to use tax free money while participating in the plan. According to the Employee Benefit Research Institute, 87% of plan participants can take a loan against their retirement account. Of those employees with access to take a loan, about one-fifth borrow against the retirement account. Come retirement, what are the effects of loans taken from pension funds on an employee's account?
Socially responsible investing (SRI) is a rapidly growing trend in markets around the world. This sustainable, responsible, impact investing model affords companies the opportunity to ensure that their investments align with their mission and values and also facilitate the global movement towards an environmentally sustainable and socially inclusive economy. SRI models involve ESG (environmental, social and governance) integration, investment screening, shareholder advocacy, sustainably themed investments and impact investing.
Defined contribution plans generally follow calendar years, which prevents compliance and administration complications that arise from an off-calendar plan year. Off-calendar plan years are typically structured to follow the fiscal year, with the rationale that the profit sharing contributions would be tied to fiscal year performance. This logic is somewhat flawed, since you are effectively giving the same profit sharing contribution at whatever point you decide to make the contribution, but you are increasing the administrative costs and risk of errors (administration or compliance) in running the off-calendar plan year.
The age-old debate of using a bundled vs unbundled model for a 401k plan has troubled plan sponsors for years. Try a Google search for “Bundled vs. Unbundled 401k“. Every provider and 401k resource seems to list the pros and cons of each model and then either promote their strategy or leave the plan sponsor with all the pros and cons, still wondering which service model is best for their 401k plan.
RPG Consultants is proud to be a CEFEX-Certified Recordkeeper and Third Party Administrator (TPA). We are one of less than 13 firms in the country to hold the certification for both TPA and Recordkeeping services. The CEFEX accreditation certifies that we conform generally to the Standard of Practice for Retirement Plan Service Providers, as defined by the American Society for Pension Professionals & Actuaries (ASPPA) and CEFEX (referred to as the Standard).
The Department of Labor (DOL) fiduciary rule, delayed from the original April 10, 2017 deadline, expands the ERISA (Employee Retirement Income Security Act) definition of “investment advice fiduciary” so that every financial professional working with retirement plans would be held accountable as a fiduciary of the plan.