A Defined Contribution plan, which is most commonly referred to as a 401(k) is a profit sharing retirement plan that allows contributions on a regular basis. The contributions can either come from the employee as a salary deferral or from employer contributions. Employee contributions are in pre-tax dollars. The employer can fund the plan either in elective or matching contributions usually up to a certain percentage of the employee’s salary. Both employee and employer contributions grow tax free until distributions are taken from the plan. Once distributions are taken, they are taxed at the recipients current tax rate. Some plans are now offering a Roth 401(k), which allows the employee to make contributions to the plan with after tax dollars. Under current tax law these Roth assets and any gain are tax free upon distribution.
The Role of Our Team as your 401(k) Advisor
Cassandra Financial Group employs independent advisors who will base their recommendations on the suitability of you the customer because we have no “in-house” 401(k) plan where there is an incentive to sell. We work with virtually all the different 401(k) providers in the market. Please visit our Current Participant page for a list of our current partners.
Maintaining an appropriate retirement plan for your company can seem like a daunting task – especially when you consider everything else that goes into running a successful business. For us at Cassandra Financial Group, it’s our specialty and main focus. In general, the role of a 401(k) advisor can be broken down into:
- Client Relationship and Expectations: Developing the client/plan sponsor relationship and setting the expectations of each party is critical in ensuring success.
- Evaluate/Review and select appropriate providers: At Cassandra Financial Group we work with you the plan sponsor to evaluate your current plan provider. As a qualified 401(k) advisor we can bring to attention any deficiencies in service delivery and recommend an appropriate alternative. Since we are not tied to a particular provider, we’re free to recommend what is best for your company and employees. In the situation where a new provider is to be selected, our team will manage the implementation process to ensure a smooth transition.
- Perform plan design consulting: In this ever changing business world, it is imperative that plan design is reviewed on a regular basis to ensure that your current plan is meeting your business needs. These provisions address matching contribution formulas, cross-tested profit sharing allocations, qualification and eligibility issues, and merger and acquisition situations. We will work closely with the provider’s administration experts to help ensure that all available aspects of plan design are considered.
- Fiduciary Support: By implementing an Investment Policy Statement (IPS), the plan sponsor can minimize their fiduciary liability. An IPS will outline a detailed plan for which the plan sponsors trust managers and the financial advisor will abide by. To avoid confusion or misunderstandings the IPS outlines such things as the plans investment philosophy, risk tolerance, and the long term goals that will help guide all decisions made regarding the plan.
- Selecting and Monitoring Investments: The plan sponsor has a responsibility under the Employee Retirement Income Security Act (ERISA) to prudently select and monitor 401(k) plan investments. Without the proper licenses, ERISA states that the plan fiduciary is not qualified to make informed investment decisions and must seek outside assistance. Our team takes on a 3(21) fiduciary status with your plan. As a 3(21) fiduciary, we assist the plan sponsor with selecting the investment funds within the plan. We continue to monitor the funds on a quarterly basis, providing investment performance reports for your companies ERISA file and making investment change recommendations as needed.
- Ongoing Plan Management: On an as requested basis and at least once annually we will review the plan versus benchmarks and /or peer groups. This includes discussing overall plan service, operation and results, such as participation levels, deferral percentages, loans, non-discrimination testing, enrollment and communication strategies.
- Improving Plan Participation: Our team will coordinate enrollment meetings and providing ongoing investment education for participants. All participants have access to a financial advisor through unlimited emails and phone calls. We will visit each location on a as needed basis and sit with each participant individually to help educate and provide investment advice regarding the 401(k) plan options. Our goal is for the participants to become engaged in their retirement savings plan and will do all we can to help them reach their retirement goals.