By Mike Narkoff, Senior Vice President, Sales
As a business owner, you are always looking for opportunities to better position your firm in the marketplace and gain a competitive advantage by attracting and retaining top talent. Expanding workplace benefits, particularlyby offering a 401(k), is a significant and effective method to achieving those big-picture objectives.
If you are considering adding a 401(k) to your employee benefits, the first step, and most important step, is finding a specialized retirement plan advisor. Your advisor will help in every stage of the process, including deciding the main objectives for your plan, developing an appropriate investment menu, and identifying plan features that support its purpose.
With the help of an advisor, identifying your plan’s goal is critical to determining its design. Do you want to shelter income personally? Do you want to ensure retirement readiness for all your employees? Once the goals are established your advisor can help you look into available plan design options.
During the research and evaluation period of plans, some questions and concerns may arise. Perhaps the most common question from small business owners is “will the size of my company limit my retirement plan options?”The answer is “no.” And by working with an experienced advisor, he or she can quickly help you realize that.
To further dispel the myths that size matters, here are three retirement plan realities every employer should know.
Anyway you cut it, everyone benefits.
Plan design is dictated by your perspective as an individual saver and a business owner. Should your plan align with your goals or your employees’ goals—or a combination of the two? Determining the overall plan goals facilitates a larger discussion on plan design, and there are design options available to meet all objectives.
There is no one-size-fits-all solution.
Every plan is customizable—even those for sole proprietors. Implementing different plan design techniques can get your plan close—if not exactly—where you want it. Automatic enrollment, auto-increase, and utilizing an open-architecture platform to gain access to a wide range of investment options are emerging as leading trends in the 21st Century Retirement Plan and are available to plans of many different sizes.
You have a say on fees.
First, be aware of “free.” You are a business owner – which means your products or services are meant to drive you a profit. It’s no different in the retirement plan industry.
Every business owner faces a unique economic situation. The menu of investment options you choose will dictate the amount of fees you and your employees pay. For example, mutual funds are available in different “share classes.” Many mutual funds provide revenue to the retirement plan providers to off-set the all in cost of administering the retirement plan.
Small and mid-sized firms are often mistaken about the availability of low-cost, or institutionally priced, funds, wrongly believing they do not have enough assets to qualify for lower fees and expanded plan options. However, with an open-architecture investment platform and a retirement plan focused advisor, you can make selections from a variety of low-cost investments.
The fee schedule for administrators and recordkeepers is also flexible. Your plan advisor can help you navigate the plan landscape, explain the fees and outline various options for paying them. There are different strategies to help lower plan costs, and your approach to fees can make a significant difference over the long-term.
When making strides to start a 401(k)—or when considering a plan change—it is important to understand the realities. Walking through the process from an educated perspective yields the best chances for an appropriate plan design. The options are available and fully customizable for businesses of all shapes and sizes and making the right plan design choices for your company and your employees can save your business money and create a stronger retirement future for employees.
About the Author:
Mike Narkoff is Senior Vice President of Sales at Ascensus, the largest independent retirement plan services provider in the U.S. In addition to sales, he has had responsibility for client services and operations, new business and conversions, product development and institutional relationship management. Mike has over 20 years of experience in retirement plan services.