How do you choose the best retirement plan for your employees?

Because you're a fiduciary and advising in the best interest of your participants, it's helpful to know the employee demographics and what they need... you know, their best interests. From there, understanding the budget and the role that retention plays in your company priorities will help you determine what your objectives should be... And some core principles are to: 1) get access to a range of investments that mitigate risk, and don't face excessive costs 2) Provide the support to get employees to participate 3) And have the support for HR to run a precise plan

It is important for sponsors to consider 💰 cashflow in order to support contributions, take into account employee demographics 👥, and assess competitors. Seeking the advice of a retirement specialist who understands plan design 📈, the market 📊, and the competitive landscape is also a wise decision. While payroll plans may be a good starting point, it is always best to consult an expert 👨💼.

Choosing the right retirement plan starts with clear goals. What do you want to achieve? Attract top talent? Reduce taxes? Boost savings? Offer flexibility? Each goal leads to different plan features. Don't forget: Employee Needs: Tailor your plan to your workforce. Budget: Balance generous benefits with costs. Complexity: Choose a plan that fits your resources. Working with an experienced retirement plan consultant provides invaluable support. They help you optimize your plan design, negotiate favorable terms, and minimize risks. A well-designed plan attracts talent, improves morale, and secures a brighter financial future for your employees. Define your goals, explore options, and invest in a successful future!

Defining your objectives is essential in choosing the right retirement plan. Determine whether your primary goals are to enhance employee retention, reduce tax liabilities, or offer flexible savings options. These objectives will guide you in selecting features such as high contribution limits, employer matching, and vesting schedules that align with your company’s strategy.

Again, talking with a retirement specialist, TPA, or payroll provider would all be good starting points. A specialist will ask you questions to help define your organization’s needs, now and into the future.

For the majority of organizations, a 401(k) may be the best fit because it keeps the costs low and has the flexibility to layer on additional options like defined benefit should the company grow. From there, you'll likely want to find: - a recordkeeper to hold investments employees want - that integrates with your payroll - provides employee education - HR service to run the plan compliantly - an investment advisor may be very helpful for a plan if you're running into road blocks above (even payroll integration is getting help with 3(16) advisors now) Recordkeepers priced for small plans: Vestwell, Guideline, Betterment, etc. Recordkeepers for big plans: Vanguard, Fidelity, etc.

Life insurance products are often overlooked as valuable retirement planning tools. Indexed Universal Life (IUL) insurance, for instance, not only provides death benefits but also accumulates cash value based on market performance, acting as a dual-purpose financial vehicle. This cash value can be accessed during retirement, offering a tax-advantaged income stream. Including life insurance in a retirement strategy can diversify and provide added security. It's worth discussing these options with a retirement specialist to see how they can complement traditional plans like 401(k)s.

Retirement plans extend beyond the typical defined benefit and defined contribution plans. For instance, Supplemental Executive Retirement Plans (SERPs) offer non-qualified deferred compensation arrangements tailored for key executives, providing additional retirement income without the limitations of traditional plans. Simplified Employee Pension (SEP) plans allow employers, particularly small businesses, to make tax-deductible contributions into IRAs for their employees, offering a straightforward and flexible retirement savings option. Additionally, Savings Incentive Match Plan for Employees (SIMPLE) IRAs are designed for small businesses, providing an easy-to-administer plan with mandatory employer contributions.

I think of costs as a sequencing: 401(k) no match: admin fee, participant fees, fund fees and advisor fees 401(k) SAFE Harbor: above fees, plus 3% of salaries or 4% match 401(k) profitsharing: employer contributions to $32,500 (in 2023) per employee ($33,000 in 2024) Defined benefit: Really up to the benefit you define, but higher risk for the employer...

Costs and benefits should be considered in both the short and long term to make an informed decision. Two things to think related to risk. First, in a defined benefit plan the investment risk to meet those obligations is on the plan sponsor. In a define contribution plan, the investment risk falls on the participants. Second, understanding certain safe harbors like 404(c), 404(a)(5) can help alleviate those risks. Certainly documentation of decision making helps.

When evaluating different retirement plans, it's essential to consider the tax implications for both the company and employees, along with administrative expenses, employee preferences, and long-term financial impacts. Defined benefit plans offer stability but can be costly and complex to administer, impacting the company's financials. Defined contribution plans, like 401(k)s, provide flexibility but transfer investment risk to employees. Additionally, plans like SEPs and SERPs have unique tax advantages that can benefit both parties. A comprehensive analysis of these factors will help you choose the most cost-effective and beneficial retirement plan for your organization.

Retirement Plan Expertise: Don't Go It Alone! Designing the right retirement plan for your employees is complex. You need to consider legal requirements, tax implications, investment choices, and your workforce's unique needs. That's where expert guidance is crucial! Consult with financial advisors, accountants, lawyers, and plan providers. They can help you: Evaluate options: Understand the pros and cons of different plans. Design a plan: Create a plan that meets your goals and complies with regulations. Minimize risks: Avoid potential pitfalls and ensure your plan is compliant. Investing in expert guidance will pay off with a retirement plan that truly benefits your company and your employees.

The saying "the best defense is a good offense" applies to many aspects of life, including managing a retirement plan. 🛡️ Plan fiduciaries must understand their roles and responsibilities in today's legal, regulatory, and litigation environments. 💼 Hiring an expert with the appropriate skills is a great way to ensure that a fiduciary can fulfill their duties solely in the interest of plan participants and beneficiaries. Additionally, ERISA requires that plan fiduciaries pay reasonable fees for expenses and benchmark them accordingly. 💸 Recent litigation has shown that plan fiduciaries must not only benchmark fees but also the services associated with them. 🔍

Consulting with these experts gives you a dual benefit. One, you'll have help navigating the best choice of retirement plan options for your employees. Second, having the right experts on hand from the beginning will save you money in the long run with their ability to tackle legal and compliance issues.

I have a Google Sheet I use to evaluate recordkeepers that I'm willing to share, that helps provide a framework to understand how much the 401k will cost per recordkeeper per advisor. Consulting with experts at an investment advisor level can help you create the right framework to evaluate a retirement plan for your company, and it's worth taking the time to learn from their expertise. Even if you don't use them, at least you'll be better off in evaluating your options. The investment advisors with the highest fiduciary responsibility are 3(38) advisors, and they'll help run your plan for you. HR leaders have lots of complex conflict and systems that require precision, so it may be valuable to have an 3(38) advisor help you run the plan

Choosing the best retirement plan for your employees is not a simple task. You need to consider various factors, such as legal requirements, tax implications, investment options, and employee demographics. Surprisingly, many companies overlook life insurance agents as valuable benefits partners, missing out on significant offerings such as annuities and supplemental executive retirement plans (SERPs). These agents can provide unique insights and products that complement traditional retirement plans. Consulting with financial advisors, accountants, lawyers, and plan providers—including life insurance agents—can help you evaluate your options and design a comprehensive plan that meets your needs and goals.

Communication is not one way. I think listening to the employees can help set the framework for your decision. And then when you go back to communicate, you can share your decision, the responsibilities of your role, and the benefits against that baseline of employee needs.

Leveraging benefits partners, such as financial advisors and life insurance agents, can enhance this process. These experts can help educate employees, address questions, and provide ongoing support, ensuring employees fully understand and utilize their benefits. Soliciting feedback and addressing concerns will further enhance engagement and satisfaction.

Over the years, while working with sponsors and observing organizational changes, it has become apparent that constant review is necessary. Managing a retirement plan is crucial for its long-term success and effectiveness. Organizations can benefit from hiring a consultant with expertise in retirement plan management. We provide the necessary support and guidance to navigate evolving challenges and optimize retirement benefits for employers and employees. By partnering with a knowledgeable consultant, organizations can ensure that their retirement plans stay aligned with their goals and remain responsive to changing circumstances. Ultimately, this fosters financial security and peace of mind for all stakeholders.