611 Druid Rd E • Suite 105 • Clearwater, FL 33756 • 727.441.9022
Meridian One Building • 4350 West Cypress Street • Suite 225 • Tampa, FL 33607 • 813.405.4846
BENCHMARK YOUR 401(K) WITH OUR GUARANTEE
Jon Brethauer, CFP®, AIF®,
CPFA, MBA
Barbara Dugan, AIF, CPFA
ProVise Management Group, LLC is a financial planning and investment management firm registered with the Securities and Exchange Commission and has been
in business since 1986. As of 3/31/2021 we were managing approximately $1.6 billion for our individual, corporate, and not-for profit clients. Securities offered
through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services may be offered through Kestra Advisory Services,
LLC (Kestra AS), an affiliate of Kestra IS, or Provise Management Group, LLC. Kestra Financial’s Reg BI disclosure information and Form CRS can be obtained at
https://www.kestrafinancial.com/disclosures. ProVise’s Form CRS can be obtained at https://www.provise.com/wp-content/uploads/2021/04/FormCRS_040121.pdf.
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.
SEPTEMBER/OCTOBER 2021 | TAMPA BAY MAGAZINE 69
As a business owner, CFO, HR Director and retirement plan
sponsor, you are also a fiduciary with a myriad of deadlines
and regulations to ensure your 401(k) plan is adhering to ERISA
guidelines. One way to meet these demands is to benchmark
your retirement plan every three to five years. Benchmarking
compares your company’s 401(k) plan against other companies’
plans that have similar assets, participants, and sometimes
from the same industry. It provides an objective view on your
401(k) and helps ensure you are providing the best benefits
including fees, services and investments.
The cornerstone of a benchmarking report is assessing the plan’s
fees. Since 2012, the Department of Labor (DOL) has required
that plan participants are provided with a comprehensive
fee disclosure annually. However, your responsibility as the
plan’s fiduciary does not end there. As the plan sponsor, you
are charged with ensuring that all the 401(k) service provider
fees are ‘reasonable’. However, it is important to note that not
only should fee reasonableness be assessed for each service
provider, but the quality and scope of the services provided
should also be considered.
This can be challenging since administration fees can be assessed
in a variety of ways, either directly or indirectly. An indirect
fee is often buried within the mutual funds’ expense ratio, and
it can be difficult to ascertain which service provider receives
that fee. An effective benchmarking report not only discovers
these direct and indirect fees but breaks it down by each service
provider and evaluates the fee based on the services provided.
Why is this important? Not only do you want to ensure that
each service provider’s fees are reasonable, but you also want
to ensure that these service providers are still the best fit for
you. Service providers should not only make sure that your
plan operates smoothly but should also help you to meet
your obligations as the plan’s fiduciary which makes you
personally liable.
Benchmarking can also improve plan results and enhance
participant outcomes. By reviewing your plan’s design,
especially as compared to similar companies, you help ensure
your plan is set up to encourage your employees to save enough
for retirement. For example, do your employees have access
to an advisor for investment and financial advice about the
plan at no additional cost? Does your plan provide education
meetings to explain the importance of saving for retirement
through the 401(k) plan? Should you reevaluate your plan’s
design by adding features such as allowing Roth contributions
or enacting an auto enrollment feature that encourages plan
participation? Benchmarking provides greater clarity to any
changes to the plan’s design that you may need to consider
providing employees with the tools they need to prepare for
a successful retirement.
Why is it recommended to benchmark your 401(k) plan every
three to five years? Between ongoing employee/employer
contributions and market growth, plans can sometimes double
their assets in just a few years. Many service providers calculate
their fees as a percentage of the plan’s assets. As a result, the
401(k) plan could be paying the service provider more money
for the same services. Since most service providers do not
automatically adjust their fees, a comprehensive benchmarking
report will allow you to re-negotiate the fees with your provider
or find a new one. Keep in mind that fees have a direct impact on
the participants overall return, so even a slight decrease in fees
can have a positive impact on account balances at retirement.
Finally, benchmarking your 401(k) plan provides documentation
that you are meeting your fiduciary obligations as the plan
sponsor. Keep the report, your findings, and any action taken
in your fiduciary file. This type of documentation could offer
protection against any excessive fee lawsuits.
For more information on benchmarking your retirement
plan, ProVise Management Group has a dedicated Corporate
Retirement Plan Department and can aid with the process to
help ensure you are meeting your fiduciary responsibilities. If
the benchmarking results do not save the plan the cost of the
study over the next two years, we will refund the fee and you
keep the benchmarking for your files. You have nothing to lose.