Like a well performing orchestra, your 401(k) needs all the players performing in harmony.

facebooktwitterlinkedinby featherConductorDepending on the size of your plan, the 401(k) can be complex because of the many moving parts.  Just as a conductor’s role is to make sure the musicians are performing the notes with passion and faithfully executing the vision of the composer, the right financial advisor can help the plan sponsor review your existing plan, and once implemented make sure that all the players are faithfully executing your score.

 

I recently completed a review of a plan for a friend, and 7 red flags were discovered.

1- The plan contained  100 participants with account balance of zero. That translates into unnecessary additional expenses.

2- The plan was perpetually being filed on the drop  dead  date of  October 15th. The question to ask-  who is holding this up and why?

3-The total administrative expenses was close to 3 times the national average. Why?

4- The fees were not represented clearly.  It didn’t correspond with schedule A and H of the tax documents. Why?

5- This plan used a bundled Third Party Administrator  (TPA). That meant that the Record Keeper, (provider of investment platform) was also responsible for the compliance. While this arrangement can work, in this case it didn’t. No one was minding the show.

6- The plan used wrong codes on the tax filing.  The plan was coded as a profit sharing only plan. This wasn’t accurate because there was salary deferral. Should the accountant have caught this?

7- The plan was created in 1994. Fees have been significantly reduced in the last 20 years. Older plans ought to be re-visited often to make sure that the fees are still competitive and the design is still consistent with the needs of the plan sponsor.

In the end, the plan sponsor has fiduciary responsibilities, which means the company is ultimately responsible for any compliance issues.

Hiring the right financial advisor who can routinely review  the various components on the sponsor’s behalf, could be a “sound” financial decision to help you through the sharps and flats of your 401(k).

 

Written by Jaimie Blackman

Jaimie Blackman

Jaimie Blackman — a former music educator & retailer— is a Certified Wealth Strategist & Succession Planner. Jaimie helps business owners maximize the value of their company through education & coaching. He is a frequent speaker at the National Association of Music Merchants, (NAMM) Idea Center and has spoken at Yamaha’s succession advantage.

As a financial literacy educator he has taught at New York University and has lectured at the 92nd Street Y, Marymount Manhattan College and CUNY.

His column is published in The Music & Sound Retailer and contributes to NAMM U online, as well as other industry trade magazines.

Jaimie is CEO of Jaimie Blackman & Company, President of BH Wealth Management, and Creator of MoneyCapsules® and the Sound of Money®.

To register for Jaimie’s live webinars, or to subscribe to his podcasts, visit jaimieblackman.com.

The purpose of this post is to educate. Our content should not be construed as advice. If legal, tax or other advice is required by the readers, professional advice should be sought.

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