Your experience with installing a 401k?

6 replies [Last post]
series7taxguy's picture
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Joined: 2010-07-16

I left a firm where 401ks were not a part of the business model I'd like to hear in as much detail as you can provide your experience in getting a 401k off the ground. What product did you use? What were the technical aspects during the installation? What type of payout did you receive?

josephus's picture
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Joined: 2005-06-23
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    MicrosoftInternetExplorer4

    Service Provider should have an Installation Guide detailing
    their requirements.  Payouts are generally based on the payouts for the
    underlying assets.   Exception 12b-1 fees can be retained by the
    Service Provider to offset fees. Generally, the Service Provider retains a Sub
    TA fee where the assets are in MF and the Plan maintains Omnibus accounts

    WARNING Fees and Compensation are today's red flags. Be sure
    to have an Investment Policy and be certain the funds are consistent with the
    stated policy. Anything you do in a 401(k) plan must be in the best interests
    of the participants. While you may not technically be a Fiduciary, somebody
    involved in the process sure is.

    Anyway, here's the list.

     

    ·        
    Selection of model. Bundled or
    Unbundled

    ·        
    Selection of service provider Bank,
    Ins Co, B/D, MF Co, TPA

    ·        
    Valuation Frequency - Daily,
    modified daily (cut offs <> market cut offs), balance forward

    ·        
    Contract/Service Agreement

    ·        
    Establish Trust if any assets are
    outside of a GAC

    ·        
    Plan Objectives such as tax
    deferral, maximization of $ to Owners/Highly Comensated, qualified (probably if
    you're looking at 401(k) plans/non qualified

    ·        
    Plan design

    ·        
    Plan Document; individually
    designed, master prototype, or volume submitter. Watch out for cutbacks if this
    is an existing plan

    ·        
    Investment Policy

    ·        
    Board of Director's resolution

    ·        
    Enrollment meetings and participant
    enrollment

    ·        
    Counseling with individuals or
    individual Q & As

    ·        
    Review of participation %, if too
    low, possible follow on set of enrollment meetings.

    ·        
    Communication of new IVR and Web
    access requirements to Participants

    ·        
    Submission of payroll deduction
    changes gathered in enrollment meetings

    ·        
    Coordination of changeover in
    service providers with Payroll (internal or external )

    ·        
    New account set up for pooled assets

    ·        
    New account set up for brokerage
    window assets. Be sure to cover brokerage window practices in your investment
    policy

    ·        
    Accounting record transfers for existing
    plan assets. Account balance data by fund and source.

    ·        
    Current year contribution numbers
    for testing purposes. LTD contribution numbers for deferral and after tax
    dollars. Pre and post 1986 after tax dollars if the plan maintained its
    grandfathered status

    ·        
    Required Minimum Distribution status
    and history

    ·        
    Loan balances, amortization
    schedules for all existing loans

    ·        
    Partial year 5500 information from
    prior service provider.

    ·        
    Blackout communication to
    participants

    ·        
    Physical transfer of assets

    ·        
    Build of participant records by new
    service provider

    ·        
    Audit/review
    of record build and asset transfer

joelv72's picture
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Joined: 2008-11-28

Are you able to bill fee or are you 100% commish?

Takingnames's picture
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Joined: 2007-11-09

Good advice from Josephus. If you think 35 bps isn't going to be enough, or you don't want to offer a plain vanilla plan,  you could set up a separate brokerage account component. If you go with a bundled plan, that might require some jerry rigging. If you go with a TPA open architecture,  or a platform where you an unbundle TPA you can typically do it a little more easily. Set a minimum on the brokerage option - say - 50k and then when people opt for that, you can bill a wrap The TPA piece normally costs more when you opt to do this.  Also set up service expectations - American Funds has a model you can use that your firm compliance team may allow you to use.   

N.D.'s picture
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Joined: 2009-07-13

Takingnames wrote:Also set up service expectations - American Funds has a model you can use that your firm compliance team may allow you to use.  Do you have a link to this? I searched their website but I am guessing it is not available to the public???

N.D.'s picture
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Joined: 2009-07-13

what the hell? oh good grief! here we go again.

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