727.441.9022
611 Druid Rd E • Suite 105 • Clearwater, FL 33756
V. Raymond Ferrara, CFP®
Chairman
Chief Executive Officer
Eric R. Ebbert, MBA, CFP®
President
Chief Operating Officer
THINK YOUR 401K IS FREE? THINK AGAIN!
By Dorothy Campbell, AIF®, Senior Fiduciary Advisor
Recently, there has been a lot of news about lawsuits against
employers who sponsor retirement plans because they have not
monitored the fees and investment options in their retirement
plan. When you are responsible for other people’s money, you are
a fiduciary as defined by the law and it’s your fiduciary duty to have
a process in place to monitor your retirement plan. Large companies
across the nation have put in place a process to thoroughly review
their plans to ensure they are fulfilling their fiduciary duties and
providing a competitive plan. However, companies in the small to
mid-size space have not yet made creating this process with their
plan a priority.
If you are one of those companies, here are 3 reasons why creating
a process and conducting a plan audit to your plan should be a top
priority.
1. Reduce your personal liability
Yes, if you are a fiduciary to your company’s retirement plan you
are personally liable. Your fiduciary duty requires you to monitor
service providers to ensure fees are reasonable and the service providers
are performing as they should. As evidenced in recent employer
retirement plan lawsuits, failure to do so can result in fines and
settlements. One of the best ways to demonstrate that you are
monitoring your plan is to complete a third-party detailed plan
audit that benchmarks all aspects of your retirement plan.
2. Save the company and plan participants money
Many companies implement a retirement plan with the purpose of
helping their employees retire. Sometimes, recordkeeping, custodial
and investment fees can make it more difficult for an employee to
retire with sufficient savings if their fees are eating away at their
savings. That is why ERISA requires employers ensure that fees are
reasonable based on the services being provided, and a thorough
third-party plan audit is a great way to do that.
During a recent plan audit that we conducted, a large recordkeeper,
reduced their costs by 15% when we simply asked for documents
from the recordkeeper. Obviously results vary from plan to plan.
Once we received those documents, we knew why they reduced their
fees – they were too high! The plan assets had grown from $5 million
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to nearly $20 million however there had been no adjustment in the
recordkeeper’s fees which are based on the plan assets.
Often, a plan audit can succeed in lowering your fees without
changing your service providers. And if the current providers are
unwilling to accommodate, than you will have the information
that you need to go elsewhere. If you are able to lower fees for
participants by just 1% of plan assets, it could mean an increase in
your employee’s net retirement savings!
3. Improve your service providers
A third-party plan audit will also analyze the services that are being
delivered by the various service providers in addition to prices. Not
all providers are created equal. Some have extremely high service
models, some have advanced technology, others simply get the job
done and even some just don’t show up.
We have found that many employers don’t even know what to
expect from their service providers. A thorough third-party plan
audit, will measure typical services that each service provider should
be providing so that you know what you should expect from the
service provider. It will also see if there are any overlaps in services
so that you can negotiate reduced fees from the service provider who
is not delivering this service to you retirement plan.
Depending on your company needs, you may be able to find a
provider that can better accommodate the services that you want
and possibly at a better price. In many cases, you can even work
with your existing providers to improve what you are receiving.
Many providers offer multiple service levels, and you may not be
receiving the most that you can from them.
Reducing your personal liability, saving your company and
participants money plus improving the services you are receiving
should be a top priority. In addition to those benefits, if you are
ever questioned about your fiduciary process through a lawsuit or
DOL/IRS Audit there is no better way to demonstrate a fiduciary
process than through a third-party plan audit.
We offer the audit to you with this guarantee: if the audit doesn’t
find enough annual savings to pay for the audit, we will refund the
audit fee in full.
About ProVise Management Group, LLC: ProVise is a financial planning and investment management firm registered with the Securities and Exchange Commission
(SEC) and has been in business since 1987. Our 12 professional advisors serve approximately 1030 clients in over 30 states. As of 6/30/16 we were managing approximately
$1.22 billion for our individual, corporate, not-for-profit, and 401k retirement plans. Please visit our website at: provise.com. Investment Advisory Services offered through
ProVise Management Group, LLC. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations
are complex and are subject to change.
/provise.com