Whose Relationship Do You Value?
When you choose to add a 401(k) plan to your employee benefits package you offer your employees the opportunity to improve the quality of the lives of their families in retirement. In other words, you do a good thing. However, 401(k) plans come with an obligation. When you adopt a 401(k) plan you become responsible for your employee’s retirement funds. The Employee Retirement Income Security Act, or ERISA, places responsibility on the employer to manage the plan at an extremely high level.
The decisions you make and actions you take will impact the standard of living your employees will experience in retirement. In layman’s terms, the law says “Don’t mess this up." And even if the law didn’t require the employer to run their plan at the highest possible level, shouldn’t you?
Many times in my career I’ve met with plan sponsors who offered subpar 401(k) plans to their employees. The investment options could have been easily improved, fees lowered and better guidance given to employees. In some cases, 40% of the plan ends up invested in cash- arguably the worst retirement investment!
Changes in plan design can quickly improve participation rates, employee deferrals and investment decisions. Sometimes sponsors will readily admit that they can improve their plan for the benefit of their employees, but respond that they value their relationship with their 401k provider. Isn't it more important to value the relationship with your employees than your 401k provider?
If you are trying to find a plan that benefits your employees while also freeing your mind from fiduciary concerns, consider learning more about Alexandria Capital.