The Four Basics of Retirement Plan Success

April 16, 2016

When it comes to establishing a company’s retirement plan, a business owner is faced with a number of decisions that can feel overwhelming. However, by focusing on four core components, you can establish a strong retirement plan and reduce your fiduciary liability.

1) Plan Design

Retirement success starts by creating a plan that is truly customized to your objectives. The first step is to understand your goals as a business owner and then create the best plan design to achieve these objectives. Goals can differ dramatically based on the size of your business and your stage of life. Some common objectives may be:

  • Maximizing benefits for you, key employees, and valued executives.
  • Reducing current taxable income for yourself and your company.
  • Creating a plan that is competitive in recruiting and retaining good employees.
  • Helping all employees reach retirement readiness.

This is only step one; you will need to review your objectives and priorities against the company’s benefits budget and changing circumstances on an ongoing basis for continued success.

No matter what sort of plan your company sponsors – a 401(k), a 403(b), or even a cash balance pension plan – thoughtful plan design will contribute to positive results.

2) Fiduciary Support Services

The decision to offer a retirement plan to employees can be very rewarding, but it comes with challenges, particularly in regards to fiduciary liability. Hiring an advisor with the expertise to provide meaningful fiduciary services can help you limit your fiduciary liability.

ERISA sets standards of conduct for employers offering retirement plans. Your central responsibility as a fiduciary is the duty to act prudently, which requires expertise in a variety of areas, including investments. However, it is important for fiduciaries to understand that their duty requires that they follow the terms of the plan document, minimize risk with a diverse investment offering, provide adequate education to participants, and most importantly, document processes. Although many financial professionals offer general investment information to plan sponsors, very few are well-versed in all facets of fiduciary oversight, and many are unwilling or unable to take on fiduciary responsibility.

It is important to distinguish between ERISA 3(21) advisors, who provide investment advice for a fee; ERISA 3(38) advisors, who assume all fiduciary responsibility for the investment lineup; and a financial professional who simply provides guidance but is not a fiduciary in any capacity. Understanding whether your retirement advisor provides any fiduciary protection is an important first step in managing your liability.

Additionally, you might suggest that your client adds fiduciary insurance to further protect against fiduciary risks.

3) Participant Education and Advice

Providing your employees with the tools to help them understand their investment options and make smart retirement savings decisions is critical to having a successful retirement plan.

Employees ask for not only education, but also investment guidance. According to a finding from the third annual Guardian Workplace Benefits Study, 85% of younger employees and 61% of older employees want more help with benefit and financial decisions; however, only 13% of employers provide the assistance employees need.

Providing ongoing education classes and one-on-one investment education will help your employees reach retirement readiness. However, many financial professionals are prohibited from providing actual guidance to plan participants because they are not acting as a fiduciary. Be sure you understand if your retirement advisors can offer this level of participant support.

4) Day-to Day-Technical and Administrative Support

The final element of retirement success is day-to-day support. As a successful business owner, you are focused on strategic planning and the operations of your businesses. You do not want to worry about whether your retirement plans are being operated correctly. Working with a consultant who can provide regulatory guidance, compliance oversight, and prompt answers to the daily questions that arise in the operation of a retirement plan offers peace of mind.

By focusing on plan design, fiduciary support, participant education, and day-to-day technical and administrative support, you’re more likely to not only build a successful retirement plan but also support successful retirement outcomes for yourself and your plan participants.

If you have any questions on how to achieve these key components for retirement plan success, contact our local experts today!

Investment products and services are not a deposit, are not FDIC insured, are not insured by any federal government agency, are not guaranteed by the bank, and may go down in value.


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