Three Significant Ways Recordkeeping Arrangements May Vary

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Recordkeeping for an employer-sponsored qualified retirement plan is pretty much just as it sounds; an outside provider is hired to literally keep a record of participant accounts. This includes everything from accounting for how much money each participant has in her account, to the number of investment shares held, to the source of money deposited. On the surface, recordkeepers seem fairly similar, but get into the fine print and there are significant differences in contracts and services offered. Here is a list of some of those differences I have seen in my history of working with various recordkeepers.

  1. Termination Clauses – When things are good, they’re good, but should your company need to terminate your relationship with your recordkeeper, there is a good chance that some fee will apply to end the relationship. Fees may vary. Also, recordkeepers have different arrangements when it comes to the services they will complete once they have been handed their pink slip. I recently came across a situation where the recordkeeper refused to complete the annual testing or Form 5500 if the plan transferred assets prior to the calendar year end.
  2. Available Investments – The universe of investment options is slowly but surely become more available thanks in part to the Department of Labor’s Fiduciary Rule, but there remains some noteworthy discrepancies in the accessibility of investments across various recordkeepers. In some cases, recordkeepers offer sub-advised or sub-managed investments which includes the investment arm of the recordkeeper offering additional oversight on traditional investments, usually for an additional fee. There are also differences in the share classes offered. Share class matters because it often dictates the overall cost of investing in an investment option along with the amount that various parties, such as the financial adviser and recordkeeper, receive in compensation from the investment. (See my blog Share Class Warfare for additional information).
  3. Third-Party Administration Services – Often recordkeepers will also offer third-party administration (TPA) services in what the industry calls a “bundled” service arrangement. In many cases, this arrangement makes sense because much of the data that a recordkeeper collects is also used by a TPA and therefore, having them work together is a win-win for the client and the provider. However, TPA services are another area with vastly different capabilities, costs, and proficiencies. Before you enter into a bundled agreement it is important to assess what the compliance and administrative needs of your plan are and whether or not the bundled TPA can meet those needs.

Although all recordkeepers may seem the same on the surface, there are several differences that can be found in the details and operation. If you would like assistance reviewing your recordkeeping arrangement, please contact me at 205-970-9088 or email


One Item to Immediately Address With Your Participants

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Often when we are engrossed in the day-to-day operation of 401(k) plan management, we can overlook the reason why we are all doing this – for the benefit of our people. We also focus on the here and now; making sure that employee deferrals are contributed on time, that investments are top notch, and that participants are retirement ready. The one item that often get overlooked is what will happen when your hard-working people pass way. The simplest way to answer that question is to make certain all of your participants have an accurate beneficiary form on file with you, the plan sponsor, and if possible, the plan’s recordkeeper. Here are 5 items that can help you and your participants get back on track with their beneficiary forms.

1. Don’t leave a beneficiary form blank, and don’t name your estate as beneficiary.
Failing to name an individual, or individuals, as your beneficiary could deprive your heirs or loved ones of inheriting your retirement assets. Another downside of not naming a beneficiary – your retirement assets would need to go through the lengthy probate process and could be subject to creditors.

2. Make a beneficiary designation for each retirement account that you own.
People often make the mistake of assuming that the beneficiary they name on one account will dictate who the beneficiary is on their other retirement accounts, but that is not the case. You need to have a valid beneficiary on file for each account.

3. Remember that beneficiary designations take precedence over wills.
Retirement assets are distributed according to the named beneficiary, regardless of any other agreements, such as wills.

4. Keep your beneficiary designations current.
Many people fail to update their beneficiary designations after major life events, such as a marriage, divorce, or new addition to the family.

5. Consider consulting a professional.
You may wish to seek the guidance of an experienced attorney, CPA, or financial advisor to help you make the best choices for you and your heirs.

Don’t let your hard work or that of your participants go to waste by having their retirement account balances go to the wrong person or worse, the state. If you need assistance with making sure that your beneficiary forms are on file and in good order, please give me a call at 205-970-9088 or email me at



Best Practices for Retirement Plan Management

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As I mentioned in last week’s blog, running a 401(k) plan is a lot of work that is marked by several complex tasks and timelines. Therefore, this week I thought it would be helpful to highlight some of best practices for 401(k) plan management.



If you have any questions about how to implement these practices in your business, please give me a call at 205-970-9088 or email me at

Three Major Reasons Your 401(k) Plan Matters

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Hours of work goes into managing and administering your company’s 401(k) and at times it may seem like a mountain of work for a molehill of appreciation. However, as someone who spends every day working on 401(k) plans, I am here to tell you that they matter – a lot! They matter to your company, your people, and you.

1. The 401(k) plan offers your employees a powerful savings vehicle
The 401(k) has many qualities that make it an attractive option for savers. High deduction limits (in 2017 employees under the age of 50 can contribute $18,000, those over 50 may contribute an additional $6,000) allow employees to save a significant amount into their 401(k) through simple payroll deductions; Roth options allow employees the ability to choose whether to be taxed now or taxed later; and features like automatic enrollment and automatic deferral increase allow employees to begin and increase their deferral amounts without proactive action.

2. 401(k)s can be a more financially prudent choice than a traditional investment account
Despite the confusion surrounding 401(k) fees, there are times when a 401(k) can be a better financial choice than an Individual Retirement Account. Due to the size of 401(k) plans, they may have access to shares of investments that may not be available to individual investors. This can lead to lower investment expenses. Additionally, 401(k) plans may offer access to a financial adviser who can provide financial education to you and your employees for no additional cost.

3. 401(k)s can lead to happier, more loyal employees
In the 2017 Workplace Benefits Report published by Bank of America, they found that 31% of employees selected a 401(k) plan as their top employment benefit, second only to health benefits. This same survey found that employee’s number one financial goal was saving for retirement. Furthermore, a study conducted by Lockton Retirement Services and detailed in the report “Finding the Links Between Retirement, Stress, and Health” found that 52% of respondents reported that having a retirement savings plan helps ease financial concerns “a great deal” and an additional 43% said it helps “a little.” Additionally, those employees with access to a retirement plan in which the employer contributed to the plan reported higher levels of job satisfaction and lower incidents of physical ailments. Therefore, if your company offers a 401(k) plan that can help employees save for retirement and reduce stress, it seems highly likely that those same employees will be happier and more loyal to your company.

Your employees look to your company to help them to save for retirement. If you do not think that your current plan is achieving that goal, please call me at 205-970-9088 or email me at and I will get to work for you today on developing a plan that works for your company and its employees.


4 Tips to Make Your Plan Conversion Go More Smoothly

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For retirement plans that are eyeing a year-end conversion or any transition in the near future, here are four tips to help make the conversion process go as smoothly as possible.

1. Make Sure Everyone is on Board

In my experience, many times the person that has the final say in deciding whether to hire or fire a service provider is not usually the same person in the company that works directly with the provider. Therefore, before making the decision to pull the plug on a provider you need to ensure that all members of your team are on board. Ask your team questions like, “What does ABC provider do that makes your life easier?” or “What is something that you wish ABC provider did better?” Once the decision has been made to make a change, make certain everyone is involved from day one.

2. Ask for Specifics

We all know that often times what we are sold and what we get don’t exactly match up. For this reason, it is important to ask your sales representative to give you specifics on what your plan conversion will look like and better yet, ask them to involve your service representative from the very beginning of the process. Get the details on payroll upload file feeds, distribution processing and timing, blackout periods, and service standards.

3. Tie Up the Loose Ends at Your Current Provider

The old saying “garbage in, garbage out” applies here. More than likely, you chose to convert your plan to a new provider because something at the old provider was broken; so, don’t bring that broken process or bad data to your new provider. Items that can be an issue in a conversion are outstanding loans, participant vesting information, automatic enrollment start dates, and more.

4. Control the Message to Your Participants

You may be excited to get a fresh start at a new provider, but keep in mind that change is hard, especially on your participants. They will have to learn a website and memorize a new call center number and they probably had absolutely no say in whether or not to make the change. The blackout period can also cause uneasiness among participants since there will be a time that they will not be able to access or even see their account balances. Therefore, make sure to get ahead of any unrest by controlling the messages they receive from you and the new provider.

There is so much that goes in to a successful plan conversion. If you would like to discuss these tips and many more, please contact me at or 205-970-9088.

Five Tips a Retirement Plan Adviser Wants You to Know

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Recently, my partner Caleb Bagwell and I had the opportunity to speak to a group of Human Resource professionals about how to leverage strategic partnerships. In preparing for the presentation, I was surprised about the lack of information on how to best work with professionals you hire to perform a function for your business; i.e. best practices for working with a CPA or top tips for getting the most out of your relationship with a benefit’s adviser. So, in the spirit of not bringing up an issue without a providing a solution, here are five things that I want you to know when working with a retirement plan advisor.

1. Ask Questions – I love the ins and outs of plan design, compliance testing, and investment analytics and strive to make the details of these complicated topics as relatable and understandable as possible, but that can be difficult. Therefore, I encourage the plan sponsors that I work with and you to ask questions when you don’t understand a topic. The 401(k) plan is designed to be a benefit for you and your employees and it is imperative that you understand how it works and works for you.

2. Don’t Accept the Status Quo – I cannot tell you the number of times I’ve heard, “We’ve always done it that way.” While the old way may have worked and may still be working, there have been significant advances in plan design and participant value-adds that your plan may want to take advantage of. Your retirement plan advisor should want the best results for your plan and “the old way” should not be an excuse not explore alternative plan designs, analyze your current investment menu, or demand better a better participant experience.

3. Read the Darn Document – When I first heard this mantra, there was a stronger adjective used, but you get the idea. Why this is so important is that the plan document is the instruction manual for the plan and following it is critically important to the operation of the plan.  While it seems intuitive that the plan providers would be following the document, that is not always the case. Furthermore, the consequences for not correctly following it can be anything from fines to total plan disqualification.

4. Be Engaged – You know your people better than anyone else, so be engaged and let your plan adviser know what works and what doesn’t. For example, several plan providers have introduced state-of-the-art website technology, but if your employees are not computer savvy and/or prefer live interaction or attentive call center representatives, speak up and let your advisor know what is most effective for you and your team.

5. Take Your Plan Off the Back Burner – The stock market as a whole has been on an upward trend for the last several years and most everyone has benefited in their investment accounts. While I am certainly not complaining about this, it has led to 401(k) plans being placed lower on the priority list because everything appears to be going well. However, just because no one is complaining, does not necessarily mean nothing is wrong. Your plan may be in need of a fee review, investment review, or retirement readiness assessment and none of those things are going to happen if no one is paying attention to the plan.

If you would like additional insight on how to best work with a qualified retirement plan adviser, please contact me at or by phone, 205-970-9088.

10 Attributes of a Retirement Plan Advisor

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There are a number of advisors to choose from when it comes to providing advice for your company’s retirement plan. There are advisors that manage personal money, provide other benefit services, are best friends with the owner, specialize in qualified retirement plans, or if you are lucky some combination of those attributes. Our firm specializes in qualified retirement plans and is partnered with the Retirement Plan Advisory Group (RPAG) to offer investment analytics, plan design reviews, and enhance participant outcomes. RPAG also assists us with offering services that satisfy ERISA’s strict standards. Here are some guidelines from RPAG that can help you select a retirement plan advisor.

Attributes of a Good Advisor Why You Should Hire One
Independence Ability to help evaluate funds and providers objectively and without conflict of interest
Familiarity with ERISA Ability to keep the committee updated on litigation, legislation and regulations impacting plans and fiduciaries
Prudent Expert ERISA section 404(a) requires fiduciaries to act with the skill, knowledge and expertise of a prudent expert
Expertise with Plan Design Ability to help plans maintain qualified status while continuing to meet the goals and objectives of our organization
Knowledge of the Provider Marketplace Ability to ensure that our plan is being administered in the most efficient manner and for a reasonable price
Qualified Plan Investment Expertise Ability to evaluate, select and monitor fund performance
Documentation Skills Ability to demonstrate procedural prudence in a well-documented manner
Communication Skills Ability to educate employees regarding plan highlights and how to create an appropriate investment strategy
Acceptance of Role as a Co-Fiduciary Willingness to acknowledge in writing that they’re a co-fiduciary to our plan with respect to the investment advice being delivered
Full and Open Disclosure Fully and openly discloses all sources of fees being received on a direct and/or indirect basis

If you would like to learn more about how we fulfill these qualifications, please contact me at 205-970-9088 or


Share Class Warfare

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As Nevin Adams on wrote about a few weeks ago in his article “Excessive Fee Suit Comes From a New Direction,” an excessive fee lawsuit was filed in Colorado on behalf of a participant whose company 401(k) plan’s recordkeeper and investment platform was Vanguard Group Inc. Yes, you read that correctly, Vanguard. For those of you who know a bit about investing, Vanguard is almost synonymous with low cost. So how is it that they found themselves the defendants in a fee lawsuit? It all comes down to share class.

Share class questions

In the 401(k) world of investing there are often one or two letters or numbers that follow the name of the investments that are meant to distinguish the internal expenses of the investment. They include (but are not limited to) all of the following: A, I, K, Y, R1, R2, R3, R4, R5, R6, Z, Adm, Instl, and Srv. Confused? Of course you are because it is confusing and pretty much meaningless to the average investor. A, for instance, typically indicates that the investment will pay the investment adviser a commission of 0.25%; whereas, R6 usually has no commissions built into the investment. To add to the confusion, there are also internal investment expenses that compensate the recordkeepers for maintaining participant records. In the case of the Vanguard complaint, the plaintiff claims he was overcharged because there were lower cost share class options available for the same investment. This is very common; where the same investment has multiple share classes all with different internal expenses and therefore different total expense ratios.

Why does it matter?

The simplest reason for why it matters is that every dollar you and your plan participants pay in fees and/or expenses is one less dollar that goes to retirement savings. Why regulators and attorneys care is much more complex. It has been common practice for plan advisors and plan providers to use the internal investment fees to completely pay for or to subsidize the cost of providing advice or administrative services to the plan; creating what the industry sold as a “free plan” or one where there was not a billable expense to the plan sponsor because all fees were covered by the investment revenue sharing. This is not necessarily wrong or a bad practice and in some cases it can be shown that it actually creates a lower overall cost to the plan to use investments that carry a higher expense ratio, but completely pay for plan expenses. However, this approach carries with it the potential for confusion and complaints for a couple of reasons. First, as plan assets grow the cost to operate the plan will also increase as much if not more right along with it. As noted in the Vanguard complaint, the plaintiff’s attorney claims that between 2012 and 2015 plan assets increased by 40.5%, but the direct compensation paid to Vanguard more than doubled. Second, the fact of the matter is that if your plan is using a share class that has internal fees, there is a chance there are lower cost investment options out there and the trend in the market today is to use those lower cost options. In many cases, the same investment will have multiple share classes and your plan may be able to keep the same investments and just change the share class.

What to do from here?

Document, document, document! Again, it is not necessarily wrong to use the investments with the built-in fees, but your plan needs to be able to show why those investments were selected and how they were monitored. Additionally, challenge your plan providers to investigate whether it would be more cost efficient to use a non-revenue sharing investment and bill for their fees. The common misconception with billable fees is that it is going to be a cost to the company, but in reality the billable fees can be paid in much the same way as revenue sharing was done, through participant accounts. Also, when you have a better understanding of what everyone is being paid, there may be a better opportunity to negotiate fees.

If you would like to discuss how share classes may affect your plan, please give me a call at 205-970-9088 or email me at


Three Potential Unintended Consequences of the DOL Fiduciary Rule

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It’s official! As of June 9, 2017, the Department of Labor Fiduciary Rule, as was written into law in April 2016, started its initial applicability phase with a final enforcement date of January 1, 2018. Quite honestly, to this point the DOL rule has mostly been a “monster in the closet” for financial services professionals; we have been unsure of exactly what to do, how to do it, and who will be on the hook for it. What is becoming more clear is that there may be a large number of advisors who chose to run away from the business completely rather than to adjust and adapt to the new regulations. If that happens, then it is estimated that we may see the financial advisor industry cut in half. If you are a non-advisor reading this you probably are asking yourself “what’s the big deal if a few financial advisors lose their jobs?” Here are three unintended consequences that plan sponsors should be aware of in the coming months.

  1. It may become more difficult to roll money out of the 401(k) plan                      The traditional advisor model for accepting 401(k) rollovers under a certain monetary threshold, $100,000 for instance, has been to use investment products that pay an upfront commission and trails through the investment product itself. This business model will no longer be allowed in retirement accounts, like rollover IRAs. Therefore, I believe it is going to be increasing difficult for participants to find financial advisors that are willing to work with “small” retirement accounts – there is too much risk and not enough reward for the advisor. The participant will still be able to rollover his account into a brokerage account that he will manage, but without the encouragement of an advisor this may be unlikely to happen. As a plan sponsor or other fiduciary to the plan, you remain responsible for all participants in the plan, even if they are terminated, which means you must keep sending those terminated participants with a balance in your plan all of the same notices you would a currently employed participant. Furthermore, plan sponsors need to place increased importance on making sure that the investments in the plan meet the needs of all participants, including the terminated with balances.
  2. Participant education may look different                                                                There is a thin line of distinction between participant advice and participant education drawn out in the Fiduciary Rule. If the advisor offers education, there is no fiduciary relationship created; however, offer advice and the advisor is now a fiduciary to that specific participant or group of participants that the advice was rendered to. Again, this blurred line can put advisors in an uncomfortable position of wanting to help participants without taking on undue liability. Plan providers are also caught in this crosshair. In fact, Fidelity, the largest record keeper of defined contribution plans, has taken the drastic step of making their call center representatives fiduciaries to plan participants in some cases. More than likely this continued focus may lead some advisors to stop offering participant education all together while some plan providers may start to offer more comprehensive participant advice.
  3. You may be forced to change advisors                                                                         With the potential shrinking of the number of financial advisors in the business, your plan may find that you are forced to change advisors. Additionally, some broker-dealers are becoming more restrictive in the type of professional that they allow to work on retirement plans. For instance, a broker-dealer may require their advisors who work on retirement plans to earn certain industry designations that reinforce the advisor’s ability to serve in a fiduciary capacity. The Accredit Investment Fiduciary® (AIF®) offered through FI360 and the Certified Plan Fiduciary Advisor (CPFA) offered through the National Association of Plan Advisors (NAPA) are just a few such designations. In any case, it is critical that the plan sponsor understands their advisor’s qualifications.

If you are unsure if any of these unintended consequences may impact your plan, please give me a call at 205-970-9088 or send me an email at     

Does Your Company’s Retirement Plan Need a Check-Up?

Medicine money image.jpgI recently attended the 2017 National Association of Plan Advisors (NAPA) Conference that brought together industry thought leaders and retirement plan advisors to discuss the latest industry trends, regulations, and best practices. In the session, “What Plan Sponsors Really Want,” we reviewed a recent survey conducted by NAPA and The Plan Sponsor University (TPSU). According to the survey, 53% of respondents indicated they are overall satisfied with their plan advisor. I think most of my readers would agree that is a meh number; not great, not bad. However, Fred Barstein, founder and CEO of The Retirement Advisor University and TPSU, was quick to point out that “plan sponsors don’t even know what it means to be satisfied.” That statement got me thinking, “how do you measure satisfaction when you don’t know what it means to be satisfied in first place?” To answer this question, I thought maybe we could compare the services of plan advisors to that of your family physician.

  1. You Should Be Able to Clearly and Quickly Define What Your Advisor Does for You and Your Plan Participants

When asked what your family physician does, you probably quickly said check my vitals (blood pressure, temperature, weight), assess my symptoms, provide a diagnosis, and prescribe a course of treatment. Can’t answer this question about your plan advisor? You’re not alone. In many of the sessions, it was revealed that plan sponsors believe plan advisors are only there to provide guidance regarding the investments in the plan (and some plan sponsors aren’t even sure if their advisor does that). It is my belief that your plan advisor should be able to not only provide advice on the plan investments, but also should be able to provide plan design and compliance support, vendor management, and participant education.

2. Your Advisor Should Be a Thought Leader

You wouldn’t visit a doctor that didn’t have a medical license and proper credentials, so why would you work with an advisor that doesn’t have the proper credentials? With so much changing in the retirement plan industry, such as the definition of a fiduciary, acceptable compensation forms, and fee scrutiny, your advisor should be able to demonstrate that she is a thought leader by understanding the rules and regulations, but also being able to explain them to you and your participants in an understandable way. One way that your advisor can demonstrate her level of knowledge is through industry recognized designations, such as the Certified Plan Fiduciary Advisor (CPFA), Accredited Investment Fiduciary® (AIF), and Certified 401(k) Professional® (C(k)P), just to name a few.

  1. Your Advisor Should Follow a Process

Your doctor probably does not walk in straight away and write you a prescription. And, if she did, would you take it? Similarly, your advisor should not make investment changes to your plan without first understanding your participant demographics, company philosophy, and plan structure. Additionally, there needs to be a documented process in place for when investment changes are made. I recommend a written Investment Policy Statement (IPS), consistent investment monitoring reports, and meeting minute notes as forms of documentation for your plan’s processes and procedures.

With company retirement plans, there is often the “if it’s not broke, don’t fix it” mentality when it comes to analyzing the plan. However, my question is again, “how do you know if it is broken, if it never was working correctly in the first place?” If you would like a check-up of your company’s retirement plan, please give me a call at 205.970.9088 or e-mail me at I would be happy to help you.