Whether you have an existing plan or are considering starting a new plan, there is a process to put you in the best position for long term success, and fulfill your fiduciary responsibilities. Remember, the main goal of any retirement plan is to provide a great savings vehicle for both you and your employees. So let’s get started on your custom retirement plan roadmap!
Step One - Developing a Custom Plan
This is your blueprint for how your plan will work. Many plans that exist today were built using boilerplate language which put substantial limitations on achieving goals important to you and your employees. Things like profit sharing options, employer matching programs, vesting schedules, and options to withdraw funds during working years, are just some of the things that can be customized for your specific plan. Click Here to access a questionnaire that can help you begin thinking of options that may be important to your business.
Step Two - Do it Yourself or Outsource?
Once you have developed your custom plan, now its time to determine who you want to do what. Like many things in life, doing things yourself can often save money, but also carries additional responsibility. Step two involves reviewing the list of tasks associated with running a qualified retirement plan, and deciding what to outsource and what to keep in house. This often is where one of our Certified Financial Planners™ can be helpful in assisting you in understanding the pros and cons of each of those decisions.
Step Three - Selecting Plan Providers
Once you have created your custom plan, and determined what responsibilities you will outsource, it’s time to determine who to select as service providers for your plan. There are countless options available, including providers that bundle services, and those that perform only certain functions. Bundled providers attempt to be a one stop shop, in that they provide each of the core retirement plan services through one company. This can be a convenient option, but some businesses find they require additional services in some areas, that the bundled provider cannot accommodate.
Another area of concern with retirement plan providers is whether they are truly agnostic, or if they are associated with a specific investment company that could result in a conflict of interest. Referring back to the Managing Risk section, as a business owner, it is important to avoid conflicts of interest as much as possible when acting as a fiduciary over your plan. Sometimes, tying in a service provider with an investment company can make it appear that the investment company is getting preferential treatment when it comes to selecting the investment menu, which we will cover next.
To help you better understand the different services involved in a plan, Click Here to download our reference guide.
Step Four - Building Your Investment Menu
Okay. We have finally made it to the part of your custom retirement plan most people want to talk about first! The reason this part of your plan is so important is because the investments are the primary tool to build wealth in your plan. Secondly, many of the lawsuits involving retirement plans are focused on poor investment selection or costs associated with the plan investments.
This area goes hand in hand with our prior section on Selecting Plan Providers. As a business owner, you have the ability to take this task on along with the legal responsibility that goes with it, or you can outsource it in a variety of ways. If you outsource it, there are a variety of different solutions. One of the highest levels of responsibility a provider will accept is called a Full 3(38) discretionary investment manager. Click Here to download a diagram that shows the levels of fiduciary relief available through different delegation arrangements.
If you choose to select investments yourself and not delegate this responsibility, you will maintain the fiduciary liability that goes with this task. This means that you will be responsible for each of the investment options in the plan and having a prudent process in place to regularly review them. In today’s litigious society, many businesses are choosing to outsource this responsibility in writing to help reduce their personal liability.
Step Five - Schedule Your Annual Plan Review
Once you have your ideal retirement plan in place, the final step is to set a date on the calendar for a regular annual plan review. Having a detailed report completed on your plan each year can help you identify problem areas including low employee participation, poor investment returns, and delays in processing by plan providers. Keeping a close eye on your core plan metrics each year will help you maintain an outstanding retirement plan. Remember, retirement plan laws will continue to evolve, and new opportunities will likely come available, so working with a qualified retirement plan specialist like one of our Certified Financial Planners™ will ensure that you stay up to date throughout the existence of your plan.