Companies that offer employees a 401(k) retirement plan need to recognize their responsibility as a fiduciary of the plan and take steps to help meet that obligation, says Joseph C. Granzier, AIF, a Financial Consultant at AXA Advisors, LLC.
“You need to work with an experienced financial professional with a focus on retirement plans who can guide you in the construction, management and monitoring of the plan platform,” Granzier says. “It is imperative that you create an investment committee to conduct this management/monitoring process. You must have an understanding of the needs and goals of the company, management and the participants in relation to the goals of your company’s retirement plan.”
While larger companies typically have an investment committee to manage this process, smaller businesses sometimes view their role as a retirement plan sponsor as a nuisance.
“It can be complicated; it’s heavily regulated and it’s getting more regulated every day,” Granzier says. “It’s virtually impossible to stay on top of it if you’re not in the industry. If you’re a small company of 50 to 100 employees and you’re running your own plan without any guidance from a group of professionals, you’re going to have a difficult time keeping in line with government rules and regulations.”
Smart Business spoke with Granzier about what a professional can do to guide you through your duties as a retirement plan sponsor.
What’s the best way to assess your performance as a retirement plan sponsor?
You can begin by gathering feedback from plan participants. Get a sense for their level of satisfaction with the plan in terms of what’s working and where improvements could be made. If participants don’t understand or appreciate the plan you are providing, it’s not doing anyone any good.
A successful retirement plan can be a useful recruiting tool for potential employees. But you need to understand what participants are seeking within the plan platform in the way of options or provisions such as a Roth 401(k). You are taking on the responsibility of providing a mechanism that your employees can use to help them grow their retirement portfolio that will serve them well and help to provide for their life needs within their retirement. The benefit to your business is that a happy, positive plan participant is more likely to be a strong and loyal employee.
How can a group of professionals help you be a better sponsor?
When you take the time to work with a professional, he or she can help you develop a platform that participants both understand and appreciate. You should work with a team that is not only knowledgeable, but understands and is engrossed in the retirement plan industry. Put them in contact with your company’s financial team so that they can work together to construct an effective plan management process.
As the plan sponsor, you should have a process in place to monitor the platform and manage the documentation of this process. Documentation is beyond critical. You need to be able to demonstrate that you are fulfilling your duties as a fiduciary and a plan sponsor.
As part of these duties, you need to be transparent about the fees that are part of the plan so that participants have an accurate understanding of how their plan functions.
What can you do to encourage retirement plan participation?
If you place a priority on the interests of your employees, you’re going to put together a solid plan. If your cash flow and profitability warrants it, you can implement a company match that encourages employees to participate in the plan and can serve as a tool to attract and retain employees.
The degree to which you promote these points of encouragement and talk about the importance of saving for retirement is up to each individual employer.
Joseph C. Granzier offers securities through AXA Advisors, LLC (NY, NY, 212-314-4600), member FINRA, SIPC, offers investment advisory products and services through AXA Advisors, LLC, an investment advisor registered with the SEC, and offers annuity and insurance products through AXA Network, LLC. AXA Advisors and AXA Network do not provide tax or legal advice, and will not assume fiduciary responsibility, or protection from any action, for your plan. AGE 121568 (12/16)(Exp 12/18)
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