As a business owner, making the decision to offer a benefits package to your employees can enrich their lives and serves to help strengthen and protect their families. Simultaneously, you can get the advantages of attracting better-qualified candidates, improved retention of valued employees and increased company morale. A robust benefit package allows you to show you care in a very tangible way and can usually be written off to help reduce the net cost to the bottom line.
Setting Up a Plan: What to Consider
One of the most common benefits you might implement is a retirement savings plan. The choices range from a SIMPLE IRA up to much more complex varieties of a 401(k), which can have complementary plans in conjunction. Before making any decision, it is vital to know that you will be exposing yourself to regulation and scrutiny by both the Internal Revenue Service and the Department of Labor. Following the rules and being familiar with the array of options available can save you and your employees a great deal of time, effort and money. If you are using a plan that requires a Third Party Administrator you should ensure you have a solid provider, and have in writing how and when you can expect to receive service when you need it. You do not want to figure out what you paid for after the fact. Many times there is an impulse to drive down cost, but if it is done at the expense of service, knowledge and experience, the supposed savings will quickly evaporate into a quagmire of confusion and mistakes. You could be exposed to litigation and fines for some mistakes. I always recommend using a local Third Party Administrator, not just because I like being able to eyeball the people I rely on, but because you can often find people you respect who have used the provider and can recommend their services.
Penny Hatcher is a Third Party Administrator who works at Employee Benefit Services (EBS), which has served the Lynchburg community as a retirement plan resource for more than 30 years. Hatcher has had the opportunity to work on hundreds of plans for companies and says, “We work to understand the goals of the client, and then develop plan features to achieve those goals. We make sure the client understands the plan features and their responsibilities to the plan and the plan participants. Finally, synchronization between the client’s service providers, such as CPA, Financial Advisor, TPA, Payroll provider and internal Human Resources, will create a team approach for successful operation of the plan.”
Setting Up a Plan: Who to Use
Working with an experienced Retirement Plan Advisor who specializes in opening and servicing retirement plans can unlock extra value. A great advisor can recommend a plan provider and educate you on the mix of investment options, plan features for your unique situation and additional complementary plans or even suggest a completely different approach so that you can make more informed decisions. This knowledge is not universal to all advisors and is a function of how focused and involved the advisor is in staying abreast of regulations and innovations in the qualified and non-qualified retirement market. One designation you might want to look for when you select a financial advisor to set up or take over the servicing of your plan is the Certified 401(k) Professional, commonly referred to as C(k)P® after an advisor’s name. According to The Retirement Advisor University at UCLA Anderson School of Management Executive Education, “to earn the right to use the C(k)P® designation requires more than just academic aptitude.
A financial professional must have demonstrated real world application of the core competencies taught in the classroom.” In order to use the C(k)P® designation an advisor needs to have 10 retirement plans and $30 million in assets under management, and agree to abide by a code of conduct and ethics.
Improving your company’s benefits package can have a positive effect on your profits when considered carefully. Using a local advisor and TPA can provide confidence when checking references and can provide critical communication in person when needed. Taking the time to locate and work with qualified advisors with a proven track record of performance is not just smart, it can make the difference between success and disaster.
Disclaimer: The views expressed here are those of Tommy Doukas. Tommy Doukas’ views are not necessarily those of MML Investors Services LLC or its affiliates and should not be construed as investment advice.
1 The Retirement Advisor University at UCLA Anderson School of Management Executive Education website: TRAU – C(k)P Designation. (2015). Retrieved March 01, 2016, from www.trau-university.com/TRAUWS/CkPDesignationOverview.aspx
By Tommy Doukas