Frequently Asked Questions

Offering a 401(k) plan has basically become a necessity to attract and retain key talent. A 401(k) is a retirement plan that allows employees to make elective salary deferrals while avoiding current taxes on that portion of their incomes. Companies may also choose to make contributions, rewarding employees with a match or profit sharing contribution – these are generally tax deductible too, but not a requirement! The 401(k) plan has become the number one savings vehicle for Americans due to the automated savings feature, powerful tax deferred growth, ability to access funds in a pinch and high contribution limits.

Withdrawals from tax-deferred accounts may be subject to income taxes, and prior to age 59½ a 10% federal penalty tax may apply.

Anyone who has or exercises discretion or control over assets of the plan, or who provides investment advice for a fee, or who has or who exercises control over the administration of the plan is a fiduciary.
  • Plan sponsors & investment committees
  • Investment consultants, if they render investment advice
  • Investment managers, if they have the control over the management and disposition of the assets
  • TPAs (third party administrators) with discretionary authority or responsibility for plan administration
Each plan must have a named fiduciary identified in the plan document, however most fiduciaries are deemed fiduciaries, meaning that based on the facts and circumstances of their role, they are held to a fiduciary standard. Small business owners, plan administrators and other decision makers at a company may all be fiduciaries.
According to ERISA, a fiduciary has five primary duties:
  • Act in the sole interest of participants
  • Exercise prudence in selecting suitable investments and ensure reasonable expenses
  • Diversify assets of the plan
  • Follow all plan documents
  • Avoid conflicts of interest
KEY TAKEAWAY Fiduciaries under ERISA are held to a high standard and a breach of fiduciary duty could result in personal liability. One way to reduce the scope of fiduciary liability is to hire prudent experts, such as the advisors at Corporate Advisors Group.

Your fiduciary obligations to the plan and your participant are the same whether you work with an advisor or not. However, the Department of Labor encourages plan sponsors to engage “prudent experts” to fulfill their responsibilities. And while there are costs associated with hiring a 401(k) advisor, they can often times use their industry knowledge to negotiate lower recordkeeping and investment expenses driving total cost down. Now that is truly a win-win.

One of the core fiduciary responsibilities for a 401(k) plan is the prudent selection, monitoring and diversification of the plan’s investment offerings. The standard of care is very high and requires investment expertise.

However, with respect to the selection and monitoring of investments, the appointment of an investment manager under ERISA 3(38) provides the ability to narrow the scope of your fiduciary responsibilities. You do not have to go at it alone.

Through the 3(38) Retirement Plan Solution, Raymond James takes on the fiduciary responsibly of investment selection and monitoring – saving you time and offering fiduciary protection, all while benefiting your employees with thoughtful investment options (as set forth in, and subject to, applicable agreements).

Good news – you can outsource many aspects of retirement plan management. A discretionary investment fiduciary will select, monitor and adjust the investment lineup as appropriate. An administrative fiduciary is responsible for managing the day-to-day operation of the plan, ranging from signing the Form 5500 to interpreting the plan document and approving distributions. The only thing left for you to do is monitor the service providers you hired. It is that simple.

There are costs associated with running all 401(k) plans. However, don’t blame yourself if you don’t know what you and your employees pay. The retirement industry has historically used revenue from plan investments to cover the costs of running a plan – an opaque and hidden structure, making it difficult to measure, manage and benchmark. These costs often cover recordkeeping expenses, administrative and advisory expenses. The advisors at Corporate Advisors Group are committed to 100% fee transparency so our clients don’t face this challenge. Our motto – know what you pay and ensure it is reasonable compared to both the industry and services received.

If plan service providers are being compensated from plan assets, the sponsor of the plan must ensure that the fees paid for the services rendered are reasonable. The advisors at Corporate Advisors Group can perform a detailed analysis of your plan’s current costs and compare the costs with those of competing providers. The analysis will provide you with a side-by-side comparison of the plan’s various cost components. Request your no-cost, no-obligation plan benchmarking report here.

Retirement plan service providers, including 401(k) advisors and record-keepers, can either be paid from the fees charged directly to the plan participants or plan sponsor, or from a portion of the investment management or servicing fee built into the pricing structure of a packaged product. In some cases, a combination of the methods may be used.

Many of our new clients come to us with a plan already in place. We can take over the service on your current plan, typically with no additional fees or cost. We will even provide a complimentary initial plan consultation. Making this change is as simple as signing a change of agent form.

Absolutely not. The advisors at Corporate Advisors Group can work with any record-keeper.