the 4 "f words" for 401(k)s

The 4 "f words" of 401(k)s:

the benefits of the utca member 401(k) Plan By: kevin ellman, cfp, ceo, Wealth preservation solutions, llc

Introduction

Arecent spate of new lawsuits against employers’ 401(k) retirement plans has refocused attention on the need for plan administrators to ensure that they are honoring their fiduciary duties and prudently managing their plans. Many of these recent lawsuits allege that plan administrators use costly investment options, fail to consider alternative investment options, and don’t exercise negotiating power to reduce fees.

Everything you need to know about managing your company’s 401(k) plan can be summed up with the four “F Words:” funds, fees, fiduciary responsibility, and fines. You must take care of the first three if you want to avoid the final “F word,” fines!

Funds

Make sure to offer a full selection of low-cost index funds.

The basic rule here is not to overpay for underperformance. We advocate using low-cost index funds. Why? Because the majority of actively managed mutual funds not only fail to meet or beat their index, but as a group, are much more expensive than index funds. The spread is about 1% for actively managed funds compared to just .06% for the line-up we offer. The savings really add up in your employees’ 401(k) account balances over the years.

Fees

Take advantage of economies of scale and leverage group buying power whenever possible.

Fund fees are not the only costs of running a 401(k) plan. Your plan will need a recordkeeper, third party administrator, and an advisor. These services can easily add an additional cost of 1% or more.

Fiduciary Responsibilities

Use a third-party administrative fiduciary to alleviate daily headaches and ensure fiduciary compliance.

The plan sponsor or trustee of your company’s 401(k) program, as its fiduciary, is held to a strict fiduciary standard. Specifically, a company’s fiduciary is responsible to its employees not only for running a program that facilitates their ability to save for retirement, but for following all fiduciary guidelines.

Benefits Of The UTCA Member 401(k) Plan:

• Dramatic Reduction in Plan Administration. The inclusion of a third-party administrative fiduciary is unique to the UTCA Plan. Normal TPA duties include compliance testing and filing of the annual form 5500. In the case of the UTCA Plan, the administrative fiduciary goes above and beyond by handling virtually all day-to-day administration. In addition to ensuring fiduciary compliance, this can be a tremendous time and aggravation saver.

• Reduced Investment-Related Fiduciary Responsibility. Wealth Preservation Solutions, LLC will select and monitor the fund lineup, thereby providing additional fiduciary protection.

• Dramatic Reduction of Overall Plan Costs. You will benefit from group buying power. We have negotiated competitive rates for the recordkeeper, third party administrator, and mutual funds. Without the benefit of group buying power, we often see total plan costs of 1.5% to almost 2%. Depending on plan size, the overall cost of a UTCA Plan ranges from .81% to .99%.

• Reduced Fiduciary Liability for Trustees and Owners. The Department of Labor fined 401(k) plans $2.57 billion in 2019. It is critical to follow all the rules and guidelines for 401(k) plans. This starts with plan design. The UTCA Plan includes all the required features and still retains the ability to customize the plan to your specific company needs.

Our team will hold regular employee education meetings and overall plan reviews to make sure everything stays on track. You will also receive our proprietary fiduciary binder that will record all the steps you have taken to fulfill your fiduciary responsibilities.

• Reduced Individual Fund Costs. The UTCA Plan will take advantage of the full range of low-cost institutional index investments, the lowest cost funds available in the market brought to you by Vanguard.

• Full Access To Your Accounts Via A State Of The Art Online and Mobile Portal. You and your employees will have full access to your accounts online and through mobile portals.

This program is available to UTCA members and their employees. Call Kevin at 201-618-8818 or email him at kellman@wpsllc.net to discuss how you can reduce your 401(k) plan costs by taking advantage of the UTCA Member 401(k) Plan: * Phone: 201-618-8818 * Email: kellman@wpsllc.net * Website: Wealthpreservationsolutions.com

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