Bundled vs. Unbundled 401(k) Service Providers: Which is Right for you?

401(k) services are necessary for almost every single business in any sector. However, choosing a 401(k) provider is not always a simple process. A number of moving parts must be coordinated, and many different facets that you need to understand – Plan Documents, Investments, Recordkeeping, Third-Party Administration. Managing your own business while attempting to coordinate these services is not only cumbersome, but also counter-productive for you and your employees. To make sure that people do not have to go through all that, bundled 401(k) services simplify the flow of services for you and everyone in your company. However, many people still go for unbundled 401(k) services because they have been sold on Unbundled being a lower cost, higher service option. As a low-cost, high service, Bundled 401(k) service provider, allow Wellington Retirement Solutions, Inc. help to dispel that myth.

Why People Prefer Unbundled 401(k) Services

As mentioned, a 401(k) program is not just dependent on a single factor. Instead, it involves a recordkeeper, third-party administrator (TPA), custodian, investment adviser, document preparer, etc. Each component can take considerable time to research and find the right provider – and if someone says they will find the provider(s) for you then you have to consider, “What’s in it for them?” More than likely, these “service finders” are taking a hefty commission. Regardless, working with several providers for one benefit plan takes up a lot of time and effort, requiring you to take significant time away from other matters. Taking care of every matter independently is referred to as an unbundled 401(k).

It might sound like a drag to take care of every single aspect on your own, but people still go about it instead of opting for a bundled 401(k) service. Some companies who offer bundled 401(k) plan services typically charge a lot with the value proposition of making the 401(k) less of a burden on the employer.

What Wellington Retirement Solutions Offers

Fortunately, Wellington Retirement Solutions, Inc. provides employers with Bundled 401(k) Plan services and a turnkey solution including:

  • Low costs - As low as $100/month
  • A wide array of investments - Including stocks, bonds, CDs, ETFs
  • Managed Lifestyle Portfolios – With low-cost index funds
  • Expert Plan Document design - Which can help save you money
  • Individual account trust reporting – Verifying payroll data
  • Third-Party Administration - Including Form 5500 preparation and non-discrimination testing
  • Cross-Testing - For Profit Sharing contributions targeted to business owners and officers
  • Safe Harbor 401(k) – To allow owners and highly-compensated employees to maximize their tax deductions
  • Point-of-Contact Service Rep – Unlike an unbundled 401(k) Plan where most of your time is spent determining who to call, Wellington assigns your company with a representative who will work with you from day one until you retire (and longer!

Wellington Retirement Solutions, Inc. offers businesses a low cost 401(k) service that is better than bundled! Wellington makes it easy for you to offer a 401(k), ensuring that you do not have to run around simply finding out whom to call with a set of questions. At the same time, offers you a service that is not too hard on your wallet.

Wellington Retirement Solutions, Inc. brings you investment flexibility, document design flexibility, expert plan administration, low costs, and investment advice with its bundled 401(k) service. Moreover, the plan custodian in the bundled 401(k) service by Wellington Retirement Solutions, Inc. is Charles Schwab & Co., Inc. – one of the largest brokerage firms in the world. Through Schwab, Wellington offers clients a wide array of investment options ranging from low-cost index funds, to stocks, ETFs, bonds and CDs.

Hence, if you want a high service 401(k), make sure to check out Wellington Retirement Solutions’ bundled service. It will cover everything you need on your terms while also being the low cost 401(k) option for you.

 

- Robert J. Alexander

Mr. Alexander is a Pension Consultant for Wellington Retirement Solutions, Inc. with over 10 years of experience in the retirement plan industry. Wellington Retirement Solutions, Inc. can help you determine what type of 401(k) Plan is ideal for your business. Even if you already have a 401(k) Plan, allow us to review your Plan provisions for peace of mind to know that the design of your 401(k) Plan meets your goals & objectives. We are committed to providing personal service excellence. If you have any questions regarding the information in this article then please reach out to one of our specialists at (888) 934-4015.

Why You Need Investment Advice for your Retirement Plan

In today’s world, you easily get advice on just about anything. Where to get the best price on suits. How to change a flat tire. Where to go for the best manicure. Etc., etc. Advice, it seems, is everywhere, and mostly free for the taking, and many consumers take full advantage of it to better their lives or make smarter decisions.

But, what about financial advice regarding your retirement plans, like your 401(k) and/or IRA?  Do you really need advice and, if you get it, will it help you get better results (i.e. more money to spend when you reach your ‘golden years’)?

The answer to both of those questions is a definitive ‘yes’ but, unfortunately, most consumers who have a retirement plan either don’t seek out advice or, even worse, take the advice of an unqualified ‘advisor’ rather than seeking out an expert. That’s not good, because even a small mistake when starting your retirement plan can multiply into a huge financial loss when retirement finally arrives.

For example, let’s take a look at management fees: Management fees are the costs you pay to have your retirement fund ‘looked after’, so to speak, while your money is busy accruing equity. In a 401(k) you can lump all your fees into what’s called the ‘expense ratio’, or, the cost of your investments. So, knowing that, and knowing that you should always try to keep your expense ratio as low as possible for the highest returns over time, which of the below two choices would be best?

1- A retirement fund offering 9.2% returns with 1.4% expense ratio

2- A retirement fund offering 8.4% returns with a 0.2% expense ratio

If you said choice #1 you’d be wrong, even though the return is higher. Fund #2 would actually lead to bigger gains as the net return would be 8.2% (8.4% - 0.2% = 8.2%), as opposed to #1 at 7.8% (9.2% - 1.4% = 7.8%). Thus, the fund with the lower gross returns would actually be the better fund due to its lower expense ratio.

That might seem like basic math, but without the basic knowledge needed to know the difference, many consumers choose #1 simply because the returns look higher upon initial glance.

This is why competent, quality advice on your retirement plans is so vital. There are so many small choices that we must make over the lifetime of your retirement account, and all of them will have either a positive or negative impact that you may not find out about until it is too late & you have lost thousands, maybe hundreds of thousands of dollars.

Seeking out a financial expert who specializes in retirement funds like 401(k)s and IRAs is a must, and finding them when you begin to invest is the key. (Let’s face it - great advice about how to save for retirement after you’ve actually retired probably won’t do you much good.)

Some companies provide an Investment Advisor to the employees who take advantage of their 401(k) plans, whereby the employee can actively learn about investing, receive guidance and get sound advice. If you have a 401(k), your best choice is to take as much advice as you can get.

 

- Robert J. Alexander

Mr. Alexander is a Pension Consultant for Wellington Retirement Solutions, Inc. with over 10 years of experience in the retirement plan industry. Wellington Retirement Solutions, Inc. can help you determine what type of 401(k) Plan is ideal for your business. Even if you already have a 401(k) Plan, allow us to review your Plan provisions for peace of mind to know that the design of your 401(k) Plan meets your goals & objectives. We are committed to providing personal service excellence. If you have any questions regarding the information in this article then please reach out to one of our specialists at (888) 934-4015.

What is a 408(b)(2) Disclosure and What it Means to Me?

There are many aspects to the financial world that can be confusing for people. This is especially true when it comes to all of the disclosures that you have to go through from various service providers that you work with through your business. One of these items that may cause some confusion is the ERISA Section 408(b)(2) Plan Fee Disclosures. Here, you will learn everything that you need to know about the 408(b)(2) and how it can affect you.

The Employee Retirement Income Security Act (also known as ERISA) Section 408(b)(2) was enacted on July 1, 2012. This act requires that all retirement plan service providers, subcontractors, and their affiliates, must disclose their compensation plan to the 401(k) Plan Sponsors. It also mandates that these dollar disclosures, both hard and soft, need to be made in a reasonable amount of time ahead of parties entering into a contract. When the contract is renewed, any changes to the contract must be disclosed as well as whenever there are any changes to the fees. This makes it so that plan providers have a fiduciary duty to manage the fees for their plans as well as ensuring that sponsors understand any “hidden” or indirect compensation that goes back to the providers. This is especially true for any compensation that is $1,000 or more.

So, what does all of this mean to you as a company looking for a provider? 408(b)(2) disclosures provide responsible party’s the information they need to benchmark their 401k retirement plan program. Fee benchmarking, which is the comparison of these fees across different companies, is there to allow the consumer to purchase from a provider that offers them the most reasonable fees while also showing consumers any companies that charge excessive 401(k) fees. When you are deciding on which provider to sponsor a 401(k) from, collect all of the information that you can from this disclosure. This includes any fees, services, and qualifications.

The depth of your benchmarking report will impact your ability to draw correct conclusions about fee reasonableness. Your failure to comprehensively consider the services rendered, who pays for those services, and how those services are paid for are all-important steps in proper benchmarking. Taking short cuts in the collection and evaluation of pertinent data, subjects benchmarking results to criticism the process was imprudent.

If this sounds a bit complicated for you, Wellington Retirement Solutions, Inc. offers a free Fee Benchmarking Report. You shop around for everything else for your business; why not use a comparison like a fee benchmarking report to help you make this important decision?

 - Robert J. Alexander

Mr. Alexander is a Pension Consultant with Wellington Retirement Solutions, Inc. and has over 10 years of experience in the industry. Wellington Retirement Solutions, Inc. can help you determine what type of 401(k) Plan is ideal for your business. Even if you already have a 401(k) Plan, allow us to review your Plan provisions for peace of mind to know that the design of your 401(k) Plan meets your goals & objectives. We are committed to providing personal service excellence. If you have any questions regarding the information in this article then please reach out to one of our specialists at (888) 934-4015.

What is Safe Harbor 401(k) and Does My Business Need a Safe Harbor Plan?

There are many different options for your company’s 401(k) Plan and it can be overwhelming trying to decide on one. One option that you may have seen in your research is a Safe Harbor 401(k) Plan.  A Safe Harbor Plan can be a great option for your business for a variety of reasons. The more you learn about how a 401(k) Plan works - particularly the annual Nondiscrimination Testing – the more you will understand why Safe Harbor is the ideal choice for most small & medium-sized businesses. This article will help you to better understand this type of 401(k) for you to make an informed decision.

A company of any size can utilize the Safe Harbor feature. What makes Safe Harbor 401(k) plans so great is that the plan will automatically pass the annual Top Heavy tests and the ADP/ACP tests. This allows the owners & officers to maximize their contributions to the plan without worrying about receiving any refunds.  In order to be a Safe Harbor Plan, the business must choose between using a Safe Harbor Match or a Safe Harbor Non-Elective (Profit Sharing) Contribution. The required match you would provide would be a contribution 100% on the first 3% of salary deferred of compensation to anyone actively participating in the Plan; with the Non-Elective Contribution you provide 3% to anyone eligible for the Plan. Either of these contributions can be a small price to pay to avoid dealing with ADP refunds for you or the high-ranking employees in your company.

The reason that Safe Harbor can be such a great option is that it allows all employees, including owners, officers, and other Highly-Compensated Employees (HCE) to save up to $24,000 without them having to worry about issues like a “Refund of Deferrals”. This happens because at the end of the year, there can be 401(k) test failures. You should know that there are quite a few complicated 401(k) nondiscrimination tests that take place each year, the results of which are often undesirable and unexpected.

There are a few other things that you should know about Safe Harbor: 1) If you want to create a Safe Harbor plan, you must do so by October 1 of a given year; after then you will have to wait until the next calendar year (and miss out on huge tax savings). 2) Employees who are eligible to make elective deferrals must be eligible for the Safe Harbor contribution - Employers will not be able to impose such restrictions as “last day of service” or any type of hours requirement for these contributions. 3) Safe Harbor contributions 100% vested immediately.

A Safe Harbor 401(k) Plan can be a great option for any business but you may find this an especially great option if you are a small business. You want to ensure that you and your employees have the best 401(k) that you can offer them because everyone wants financial stability when they retire.

Wellington Retirement Solutions, Inc. can help you determine what type of 401(k) Plan is ideal for your business. Even if you already have a 401(k) Plan, allow us to review your Plan provisions for peace of mind to know that the design of your 401(k) Plan meets your goals & objectives.

 - Robert J. Alexander

Mr. Alexander is a Pension Consultant with Wellington Retirement Solutions, Inc. and has over 10 years of experience in the industry. Wellington Retirement Solutions, Inc. is committed to providing personal service excellence. If you have any questions regarding the information in this article then please reach out to one of our specialists at (888) 934-4015.

Five Common Mistakes Made By Retirement Plan Sponsors

More than ever before, liabilities and regulations are becoming almost overwhelming for 401(k) Plan Sponsors.  Changes in the tax laws, new IRS rules, fiduciary responsibilities, as well as ever-increasing government regulations mean that, occasionally, a 401(k) plan sponsor might make some mistakes.  The problem, of course, is that these mistakes can cost your company, and your employee’s money, as well as causing major headaches.  Below are the Top 5 potential pitfalls you need to be aware of, so that it doesn’t happen at your place of business.

 Mistake #1: Failure to Effect Employee Deferral Elections

A relatively common error, a missed deferral opportunity is when a plan’s sponsor does not process an employee’s elective deferral. What happens next is that said employee receives taxable compensation that should have instead been contributed to their plan, and so they miss out on the a pre-tax contribution and tax deferred earnings they should have received. The employee could also be missing out on an employer match if the plan offers a matching contribution. The rules have recently been somewhat simplified to correct a missed employee election, but is best not to let this happen in the first place.

 Mistake #2: Excess Deferrals

The IRS sets elective deferral limits that can be made each year to qualified and non-qualified plans.  This includes 401(k)’s, SIMPLE 401(k)’s and 403(b) plans and SIMPLE IRAs. The problem; making deferrals in excess of legal limits is a big no-no, but a mistake that many plan sponsors routinely make.  Most of the time the plan sponsor is not to blame. The mistake happens when a new employee transfers from one division in the company to another or the employee joins your company and has previously made contributions to his/her former 401k plan and is not aware that the deferral limitations apply to them as a person for the entire calendar year.  An Excess Deferral that is not corrected timely can cause ‘double taxation’ of those amounts to the participant.

 Mistake #3: Failure To Use The Correct Definition Of Compensation

Every qualified plan will define what compensation is for a participant. The definition of compensation plays a vital role in regards to annual compliance testing and the calculation of employer contributions.  Some plans may also limit what an employee can defer as a percentage of compensation. It is extremely important to understand and use the correct definition of your plan’s compensation.  I often recommend plan sponsor’s do an annual review of this plan definition.

 Mistake #4: Correction for Exclusion of Employees for Elective Contributions or After-Tax Employee Contributions

The problem here is one of exclusion, caused when an employee who qualifies for a specific plan doesn’t take advantage of said plan because the plan’s sponsor doesn’t correctly notify what, when, and how they become eligible to be a participant.  This can, in a worst-case scenario, cause that plan to become disqualified, a huge problem not only for every employee of that company but also for the company itself. For the employee, the loss of an opportunity to put money into a tax-favored plan can mean the loss of future income.  There could also be a lost opportunity of a company match if offered.

 Mistake #5: Failure to Update a Plan

Another common plan sponsor mistakes is simply not to timely update their plan on a regular basis.  As we mentioned earlier, 401(k) (and other plan) rules, regulations and requirements are constantly changing.  If a plan’s sponsor does not keep up with those changes, and implement them into their plan, that can spell big financial problems all-around, including the loss of qualified status. Every qualified plan is required to be restated every five to six years.  This is commonly known as a plan restatement.  The plan is restated to account for all current and past regulations that have gone into effect since the prior plan restatement.

 

- Robert J. Alexander

Mr. Alexander is a Pension Consultant for Wellington Retirement Solutions, Inc. with over 10 years of experience in the retirement plan industry. Wellington Retirement Solutions, Inc. can help you determine what type of 401(k) Plan is ideal for your business. Even if you already have a 401(k) Plan, allow us to review your Plan provisions for peace of mind to know that the design of your 401(k) Plan meets your goals & objectives. We are committed to providing personal service excellence. If you have any questions regarding the information in this article then please reach out to one of our specialists at (888) 934-4015.

Important 401(k) Deadlines

Being aware of 401(k) deadlines is as important as any other aspect of a retirement plan. Download a copy of our 401(k) Deadline chart here.

- Robert J. Alexander

Mr. Alexander is a Pension Consultant for Wellington Retirement Solutions, Inc. with over 10 years of experience in the retirement plan industry. Wellington Retirement Solutions, Inc. can help you determine what type of 401(k) Plan is ideal for your business. Even if you already have a 401(k) Plan, allow us to review your Plan provisions for peace of mind to know that the design of your 401(k) Plan meets your goals & objectives. We are committed to providing personal service excellence. If you have any questions regarding the information in this article then please reach out to one of our specialists at (888) 934-4015.