The key component of a successful ERISA qualified retirement plan is the design. The focus generally is on cost and investments when it really should be on:
Once the plan sponsor obtains the answers to those questions, they can begin to devise a targeted program. The first step is to sit down with the "powers that be" and get a feel for what the entity is trying to accomplish.
After the overall base line is established, then a budget for the benefit must be set. This involves looking at the total number of dollars that will be committed and seeing how they are allocated among the employees.
A major decision in this area is the demographics of the entity. A "year-end" census will give an indication of levels of likely participation and where the company contributions are going to land. It is imperative to understand the makeup of the employee base as it will indicate future success or failure of any cogent plan design.
Poorly performing plans are ones that lack participation, have unregulated eligibility, or spendthrift allocations.
Prizant Group, Ltd. provides consulting services for 401(k), 403(b), 457, ESOP, Cash Balance, and Traditional Defined Benefit plans. Our services can be engaged for:
401(k), 403(b) & 457
Acting as either a 3(21) or 3(38) Fiduciary, our plans are governed by a concise Investment Policy Statement (IPS). This IPS governs the trustees actions in regards to the suitability of investments (Mutual Funds, Exchange Traded Funds, Collective Investment Trusts) offered to the plan participants. The IPS provides a guideline for continual analysis of a plan's investment line-up. Major considerations are: Expense Ratio, 3 year performance vs. Morningstar Category, Manager Tenure, and "Style Drift." Deficient funds are either placed on a "Watch List" for future review or replaced with a better option.
Defined Benefit or Cash Balance
The management of Cash Balance or Traditional Defined Benefit assets is a completely different animal as these plans are "ruled" by actuarial calculations. The "pooled assets" need to be invested in conjunction with interest rate assumptions with the ultimate goal of "assets equaling liabilities." Additionally, the client should not be exposed to wide variances of annual contributions due to erratic investment results. Liquidity is always an issue as terminated participants either enter "pay status" or can accept a "lump sum" distribution. Ultimately, the portfolios are designed to protect principal and produce a "reasonable rate of return."
As for participants, our investment advice is focused on the age of the client, their risk tolerance, and the importance of their retirement assets. Age is extremely critical factor in the selection of investments. A 60 year old does not have the "time to recover" the losses that inevitably take place in the equity/bond markets. The "time value" of money is tenet that few investors understand. A loss of 40% will require a return of 75% to get back to even!
Ultimately, the long term goal for retirement savers obtain a return that is running about 3-4% above the inflation rate. This hurdle is best accomplished by using index investing (passive) for the domestic equity sectors (Large, Mid, Small) as active managers generally are unable to outperform the indexes in 80-90% of the time.
International equities are a different ballgame and seem to be better suited for the analysis and timing of active management. Also, the bond markets have become so unstable that one needs a quality management team to make the right choices.
Continual Pension Consulting
Plan Redesign consists of : Company Contribution Alternatives, Audit Support, New Amendments, Payroll Deferral Issues, Loan Problems and Terminated Employees with Balances.
Employee Financial Education
(Unlimited Onsite, Virtual or Offsite). Meetings can be scheduled for groups or on an individual basis anytime during the year
Vendor Selection and Maintenance
In conjunction with Plan Sponsor, the Record Keeping and TPA will be selected based on current market pricing and service requirements. The Prizant Group will coordinate the entire takeover process (if assets transfer to new record keeper). Duties include: all necessary paperwork, weekly phone calls, contract termination issues, payroll integration with new record keeper, Initial enrollment meetings for all employees.
Any issues pertaining to participants (loans, distributions, statements, deferrals, asset allocation, web access, vendor service) will be handled by us. HR support includes: payroll deferral and matching errors, year-end census requirements, 5500 analysis, eligibility issues, company contribution fixes, terminated participant with balances procedures, and communication between record keepers and TPAs.
Annual Trustee Meeting
Agenda includes: plan design review, company contributions, testing issues, new ERISA/DOL regulations, adherence to IPS, and "Watch List" or other communications to participants.