Why Should Companies Review Their 401k Plan?

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Plan Sponsors

In today's ever changing regulatory market, it is more important than ever to stay on top of your 401K retirement plan.

If you answer no to any of the following questions, now is the time to review your plan:

  • Have you done a complete review of your 401k plan in the past twelve months?
  • Are your fiduciary responsibilities up to date in sponsoring a retirement plan?
  • Do you have a written Investment policy statement?
  • Have you conducted a employee education meeting on the 401k plan in the last 6 months?
  • Have you conducted a fee comparison to make sure your plan is competitive?
  • Do you understand the new "full fee disclosure" rules (408b2) that will begin in 2012?

Now more than ever, businesses should analyze the qualified plans they have in place to ensure they are offering the right options to their employees at the lowest cost. Companies that best manage 401k administrative, service, and investment management fees will benefit.

Thank you for your time and feel free to give us a call or email anytime to set up your independent 401k review.

What is 408b2?

Under the 408(b)(2) regulation, the covered service provider must disclose in writing to the responsible plan fiduciary the direct and indirect compensation it expects to receive for the services being rendered. The regulation defines five categories of compensation to be disclosed.

  • Direct compensation
  • Indirect compensation
  • Compensation among related parties
  • Compensation for termination of the arrangement
  • Recordkeeping services

Compensation is defined in the regulations as anything of monetary value (for example, money, gifts, awards, and trips), but excluding non-monetary compensation valued at $250 or less received during the term of the contract or arrangement.

Direct Compensation

The covered service provider must provide a written description of all compensation reasonably expected to be received directly from the covered plan by the covered service provider, an affiliate, or a subcontractor either in the aggregate or by service.

Indirect Compensation

A description is also necessary disclosing all indirect compensation that the service provider reasonably expects to receive. This would include identification of the services for which the indirect compensation will be received and identification of the payer of the indirect compensation.

Compensation paid among related parties

There must be a written description of any compensation that will be paid among the covered service provider, an affiliate, or a subcontractor, in connection with the services provided to the covered plan.

Recordkeeping services

Without regard to the disclosure of compensation, if recordkeeping services will be provided to the covered plan the following must be disclosed .

Manner of Receipt

The disclosure must also include a description of the manner in which the above compensation will be received, such as whether the covered plan will be billed or the compensation will be deducted directly from the covered plan's account(s) or investments.

Feel free to contact us for information.