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401(k) Fees: Participants’ Best Interests May Not Be Served by the “Race to the Bottom”

There’s good news for employers! Many have been on edge as they read about the “excessive fee” lawsuits filed against retirement plan fiduciaries, some of which have made their way to the U.S. Supreme Court. Or they’re shaken as they hear about the detailed fee document requests and questions from Department of Labor auditors to 401(k) and 403(b) plan sponsors and the fines and penalties that can result from DOL investigations.

While lawsuits and investigations have served a purpose in lowering plan fees, a side effect is that many plan sponsors, in their concern to meet compliance standards, have made a search for the lowest fees such a priority that they have unwittingly overlooked the best way to serve plan participants! In fact, when I meet with employers, they often first tell me they need to reduce plan fees to create a “hedge of protection” for themselves.

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QDIAs...A Recipe for Fiduciary Protection (and a Better Retirement Plan)

A Qualified Default Investment Alternative – more commonly known as a QDIA – is a provision available to 401(k) and 403(b) plans that reduces the potential personal liability of plan fiduciaries while improving the ability of participants to build toward retirement. For many employers whose plan doesn’t currently have a QDIA, only a few steps are required to take advantage of its benefits.

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Target Date Funds, Part 2: Participants Lost in Space?

Target-Date Funds can be a poor investment “shuttle” for plan participants, as eventually discovered by many employers who act as “Mission Control” for their corporate retirement plans. In meetings with 401(k) and 403(b) plan sponsors, I frequently learn that these employers believe they have successfully launched employees on a flight path toward retirement success by offering a Target Date Fund series in their plan. Unfortunately, plan participants invested in a Target Date Fund can find themselves financially “lost in space” when they retire, due to common misperceptions regarding TDFs, as well as the funds’ complex and often confusing nature. This backfires on the high hopes of employers to assist their employees in preparing for their financial futures.

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Target Date Funds: Can Employers Get Lost in Space?

People often say to shoot for the stars, because if you miss you’ll at least hit the moon - which is easy to say if you aren’t an astronaut! An astronaut would probably tell you that if you miss your target you’re not likely to land on the moon, but in the vast emptiness of space, drifting longer than planned and hoping your supplies will last is hardly a successful mission.

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Employee 401k plan participation low? Be a momma duck!

When I visit employers to help them improve their 401(k) and 403(b) retirement plans I often hear them say “We’re just not sure how to get more people to enroll in the plan!” It is a common problem. Pencil and paper at the ready, my trusty binder of go-to resources at my side, I am always ready to help them tackle it.

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To the Rescue!

Sharpened pencil in hand, I step out of my car. Under my arm I carry my binder with helpful retirement plan information and go-to resources. I have just pulled up to a corporate office suite, having recently disembarked from a meeting with another company owner nearby. I remember the smile of gratitude on his face just an hour earlier as I showed him ways to improve his company’s 401(k) plan with lower-cost investments, as well as save valuable time for his staff by making plan administration easier. The knowledge that these meetings are a genuine help to others is like a fresh breeze in my sails, reinvigorating me and propelling me forward to new explorations with other retirement plan sponsors.

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Is Your Form 5500 an Errata Piñata?

Every year in Mexico around December 16th, in a tradition four centuries old, townsfolk begin the nine-day celebration of Las Posadas. This celebration features a dramatization of the Christian nativity, as well as the omnipresent and iconic piñata in the shape of a seven-pointed star. Historically, the seven points of the piñata represent the seven deadly sins, and the goodies inside represent a reward for fidelity to advised virtues.

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