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New Fiduciary Rules Impact 401(k) Plans

Over the last few months we have had numerous conversations with our clients regarding the Fiduciary Rule from the Department of Labor (DOL) that went into effect on June 9th.  This rule has certainly created controversy in the Financial Services industry but what cannot be debated is the core focus of this legislation…protecting the individual investor. As a firm we applaud the new guidelines and are proud of the fact it has had no impact on our business model because we have operated in a fiduciary capacity for our clients since 2010.

Recently we have had business owners and managers ask how the Fiduciary Rule could potentially impact them as they have seen headlines with some alarming figures. For example, Voya was charged in September with a $2.8 million lawsuit for ‘excessive compensation’ with their retirement plan division. Earlier this year TIAA Cref settled a $5 million lawsuit and New York Life paid $3 million due to legal battles over 401(k) plans. The common thread between these lawsuits is that the plans were not being managed in a fiduciary manner. Profit margins and the companies interest came before the individual employee.

Have you Reviewed Your Company Retirement Plan?

To avoid this, a company retirement plan should be analyzed and updated on a regular basis. If you haven’t reviewed yours recently here are some key points we would encourage you to consider:

  • In what capacity is your relationship with the advisor on your plan? Do they charge a flat fee or are they compensated based on the investments within the plan?
  • How much are you and your employees paying? What is the fee structure and are there breakpoints that you need to be aware of?
  • How often do you review the investment choices within your plan? We suggest that this be done twice a year.
  • How diverse are the investment options within the plan? Are they proprietary or all from the same fund family?
  • Are you receiving the support and service you need to educate your employees to help them effectively manage their account?
  • When was the last time you received a second opinion on your companies retirement plan? With more transparency and competition prices have dropped, often we are able to improve the plan while also offering a lower price.
  • Has your plan grown and changed with your expanding company? A ‘one size fits all’ is not appropriate even for a new start-up.

Are you Protecting You and Your Employees?

If any of these bullet points cause you to pause or you do not know the answer, we encourage you to do your own due diligence. A company retirement plan can be a powerful tool in attracting and retaining employees, take the time to make sure your plan is appropriate and truly working for you. If you would like a second opinion we encourage you to contact us!

– Matthew Blake, Senior Wealth Management Advisor, Wambolt & Associates

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