Before we can talk about retirement readiness, executive compensation, recruiting and retaining employees, your plan must meet all the required regulations and strive to implement best practices in the areas of recordkeeping, administration and plan design. Additionally, your plan must be designed to accomplish the goals for your organization. Your purpose for your plan will determine the features and options that are established in your plan document for the benefit of your participants.
Common Plan Design Questions:
· Should I have a safe harbor plan?
· Should I match or contribute? If so, how much?
· Should I add profit-sharing or a cash balance option?
· When should employees become eligible?
· Should employees have the ability to borrow from their plan?
Plan Management is the foundation of any retirement program, yet this is an area that many plan sponsors take for granted by assuming that everything is ok. A simple oversight, failure to comply with rules, or failure to manage services and fees can often lead to trouble. Likewise, having the wrong plan features can ultimately determine whether a plan meets the objectives of the plan sponsor. The mentality of “if it’s not broke, don’t fix it” does not necessarily apply.
Plan Management also encompasses vendor selection. Plans are required to select vendors and pay reasonable fees based on the services provided. As retirement plan sponsor you cannot fail to review and update your plan vendors as appropriate.
The Six8 Approach: Having the right plan design and plan features determines whether a retirement plan will ultimately accomplish the goals of an employer. A thorough understanding of the program’s objectives and review of the plan design is the first step of any retirement plan engagement.
Our first step with any new client is to gain an understanding of the current goals for having a retirement program, review the current plan design and work with our clients to consider plan designs that might influence or improve the desired outcomes.
Because the service providers are the foundation of your plan, it is imperative that employers not only have the right providers, but that the providers are routinely reviewed to ensure that plans are receiving the best possible service at the best possible price. While some retirement plan specialist will benchmark services and fees using a “report”, we find that the best way to benchmark a plan is to go to market. In the first year of a plan engagement we will go to market and obtain quotes from service providers to ensure that we know the competitive rates for each plan. We repeat this process not less than every 3 years.