What traits in their plan’s advisor do plan sponsors value? Which ones should they value?

What traits in their plan’s advisor do plan sponsors value? Which ones should they value?

BY: David I Gensler, MSPA, MAAA, EA 

Which Qualities Plan Sponsors Do Value

A recent poll of plan sponsors wanted to know which services plan sponsors most value from their advisors. Asked to name their top three, two stood out: Read More

Business Owners: Find Your Best Retirement Plan—Part 2

By the Madison Pension Editorial Team

As we addressed in Part 1, your options for implementing a retirement plan for yourself and your employees extends beyond the typical 401(k) plan. Retirement plan sponsors should investigate popular retirement vehicles, even to supplement their 401(k) plans, to ensure they are maximizing benefits for participants based on the unique needs of their organizations.

In Part 1, we covered a defined benefit (DB)/defined contribution (DC) combo plan, which can help businesses lower their income taxes and make up for lost time in putting aside money for retirement. In this segment, we will highlight one particular DB plan known as a cash balance plan, which also contains many elements of a DC plan. A few of its elements also closely resemble those of a 401(k) plan. If this all sounds a bit confusing, read on to see how it all irons out.

While cash balance plans are the fastest-growing retirement plans in the country, only about 10,000 such plans exist in the United States, compared to about 500,000 401(k) plans.  Yet, cash balance plans grew in popularity by around 500 percent during the 2001-2011 decade. Why? These plans allow owners of small firms (50 or fewer employees) to avail themselves of considerably higher tax-deductible contribution limits than 401(k) plans allow.

Let’s look at how cash balance plans compare to other types of plans noted above:

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Cash Balance Plans: Putting More Tax-Deferred Money Away for Retirement

By David Gensler, President

Cash balance plans are the fastest-growing retirement plan in the country—flooding a market saturated with 401(k) profit-sharing plans, which are on a flat to slightly downward trajectory. According to market research, cash balance plans—hybrids of defined benefit (DB) and defined contribution (DC) plans—increased in number by 500 percent during the 10-year period ending in 2011.

So, what’s the big deal with cash balance plans? In a nutshell, they offer business owners the opportunity to avail themselves of considerably higher tax deductible contribution limits compared to 401(k) plans, reducing their tax bill and allowing them to accumulate more retirement wealth at an accelerated rate.

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Six Questions Plan Sponsors Should Ask Following the Supreme Court’s 401(k) Ruling

By David Gensler, President

A few weeks ago, I commented in my last blog on the recent U.S. Supreme Court case, Tibble vs. Edison. In that ruling, the Court clarified that retirement plan sponsors have a fiduciary duty “to continuously monitor” the investments in their company’s 401(k) plans. The Court’s ruling also spelled out the responsibilities of plan stewards, directing them to not only monitor trust investments but also “remove imprudent ones.”

While this certainly was not news to the professionals in the retirement plan field, it may come as a surprise to the business owners that sponsor 401(k) plans.

If you are in this latter category, you may be getting an inkling that your practices as a plan sponsor should change. And you would be on the money. Yet the Court’s ruling did not provide any practical guidance as to what this “duty” actually means. Nevertheless, without committing a lot of time and effort to updating your process, you and your management team can create procedures that will lead to what most observers would view as a robust fiduciary governance program.

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