Do not take this lying down

Do not take this lying down

If you are the plan sponsor for your company’s 401(k) plan, you have a fiduciary obligation to monitor the plan.

To provide protection for individuals in 401(k) plans, Congress established minimum standards for most voluntarily established retirement and health plans in private industry with the Employee Retirement Income Security Act of 1974 (ERISA).

One of the fiduciary responsibilities set forth by ERISA is ensuring that fees paid to service providers and other expenses of the plan are reasonable in light of the level and quality of services provided.

The 401(k) world is littered with high fee plans that employers buy into every day. And the group annuity contract 401(k) is one of the most expensive options available.

Group annuity contract plans are sold to the plan sponsor by a representative of the insurance company who never becomes a Fiduciary of the Plan. In addition, the plan participants never own the mutual fund; the insurance company owns it.

This impacts the performance of the plan because the insurance company takes a percentage of the returns off the top—typically 1% to 3%. That percentage that the insurance company takes dramatically affects the final balance that the participant has available for retirement.

For example, if a participant puts $8,000 per year into his or her 401(k) account for 30 years and the insurance company takes 1% off the top, as much as $150,000 would have been chewed up in fees. For a retiree to have the account reduced by $150,000 can be life changing.

The bottom line is this: do not assume that your retirement plan is fee friendly. Apollo Wealth Management will do a side-by-side comparison of plan options that looks at the impact of plan fees and determines if the plan is compliant with everything that needs to be done for the Department of Labor (DOL).

Talk to us today to ensure you’re meeting your fiduciary obligations as a 401(k) plan sponsor.