Recent multi-multi-million dollar class action settlements by Nationwide, Mass Mutual and Lockheed Martin are only the latest wakeup calls for plan sponsors who are coming under magnified scrutiny by employee groups and advocates.
Retirement Services & Financial Advisors - Serving Columbus & Beyond
To the consternation of many plan sponsors, nearly one-third of eligible employees forego participation in their 401k or 403b plans. The percentage is slightly higher, around 38 percent, for smaller plans which are already struggling to achieve cost efficiencies.
The most heavily scrutinized fiduciary duty of a plan sponsor is its role as an Investment Steward, which also extends to members of the plan’s investment committee, trustees, and anyone else who is involved in the oversight of investment decisions for the plan.
With the heavy emphasis by plan sponsors on increasing plan participation and deferrals, another, potentially larger, challenge often simmers on the back burner. For many small to mid-size plans, the growing pool of terminated participants could begin to boil over, wreaking havoc on recordkeepers and significantly increasing plan costs.
For many small businesses comprised of one or several highly compensated employees and a few non-highly compensated employees, the Safe Harbor 401k plan may be the best option if maximizing contributions is a primary objective. Safe harbor plans effectively remove the barriers of discrimination testing that limits the amount that can be contributed for highly compensated employees.
Proposed Changes to Retirement Plans
For businesses with less than 25 employees, the allure of adopting a SIMPLE IRA as their employer-sponsored retirement plan is very tempting. Simple to set up – just set up an IRA for each eligible employee; and there is no administration. The required matching contribution is only 3 percent, and only on actual salary deferrals.
For some time the conventional wisdom has been that adopting 401k plans is too expensive and too cumbersome for the smaller business scale. Chief among the more onerous requirements had been the nondiscrimination compliance testing for contribution and compensation limits.
For business owners, there’s no shortage of retirement plan options, each with the capacity to accept larger contributions than individual or employee plans with commensurate tax advantages. Until recently, the default options for many business owners had been the Simplified Employee Pension (SEP IRA) or the Savings Incentive Match Plan for Employees (SIMPLE IRA) chosen in large part for their low cost and simplicity. However, for business owners in the right situation, the 401k plan is quickly becoming the plan of choice for its even greater capacity and flexibility.
Generally, anytime an employee or contractor is hired to a position that handles any aspect of a company’s finances – from cashiers to CFOs – are required to be bonded by their employer. In such cases bonds are purchased as protection against fraud, theft, or other instances of dishonesty that result in financial loss to the company.