Guest jfgc Posted January 3, 2000 Posted January 3, 2000 My company has a 401(k) profit sharing plan in which employees may contribute up to 15% of salary with the employer matching $ .50 of $1 up to 4% of contributions. They have 7 investment options with a banking institute as the investment manager. While I have experience in other benefit areas I do not have experience in this new duty as coordinator of the plan for the company. While I research this area what are good questions to pose to the investment manager regarding the plan and the company's desire to increase the options? Also, what are best resources for 401(k) administration?
Guest lexis2 Posted January 10, 2000 Posted January 10, 2000 Our organization has a self-directed 401(k) plan for employees, and new enrollment is allowed 2 times/year (Jan and July). Currently, we are having all enrollees renew their respective deferral elections 2 times/year, and this is very time consuming, and sometimes staff do not want to do this since they are merely continuing the same deferral amount. What are the minimum record keeping requirements for having existing participants make elections for the plan? How often must a participant complete an election form? Our current practice is that if a partipant does not complete an election form we cut off their contributions to the plan. Are there IRS regulations on this issue?
Guest Posted January 10, 2000 Posted January 10, 2000 I would recommend to both of you who have posted, to discuss with your employer hiring an employee benefits consultant to help with handling your 401(k) plans. The regulations are varied and can be complicated at best. I'm not suggesting that you cannot learn the ins and outs of handling 401(k) plans, it's just that you probably have other duties and responsibilities which take up the majority of your work time. By using a professional consultant, you can be more readily assured that your plan will remain in compliance and the administration of the plan on your part should be much easier. There is a cost involved, but I believe well worth it in the long run. Send me an e-mail if you'd like to discuss further. ------------------ Carol J. Ringwald Senior Consultant Shawmut Consulting Assoc.
Guest mo Posted January 10, 2000 Posted January 10, 2000 Lexis2, I think you will find that most sponsors administer their 401k plans such that an election stands pat from year to year until and unless altered by the participant. Of course, assuming no plan language to the contrary.
Jon Chambers Posted January 12, 2000 Posted January 12, 2000 In response to questions to ask, the PWBA Advisory Council Working Group recommended the following questions for Plan sponsors monitoring or considering changes to investment options (warning--this is moderately long): "The following are examples of questions which fiduciaries may consider in hiring and monitoring the performance of a service provider. Given the wide range of plan needs, it is impossible to provide a complete list of questions which will be applicable to all plans and all circumstances. Nevertheless, the Working Group believes that the following are representative of the types of questions to which fiduciaries should seek answers to satisfy their obligations as fiduciaries under ERISA. A. ISSUES FOR FIDUCIARIES WHO ARE HIRING A SERVICE PROVIDER 1) What service or expertise does the plan need? Is the service or expertise necessary and/or appropriate for the functioning of the plan? 2) Does this service provider propose to provide the service that is necessary or appropriate for the plan? 3) Does this service provider have the objective qualifications to properly provide the service that is necessary and/or appropriate for the plan? Generally, the fiduciary should seek the following information that will vary with the type of service provider being retained: business structure of the candidate size of staff identification of individual who will handle the plan's account education professional certifications relevant training relevant experience performance record references professional registrations, if applicable technical capabilities financial condition and capitalization insurance/bonding enforcement actions; litigation termination by other clients and the reasons 4) Are the service provider's fees reasonable when compared to industry standards in view of the services to be performed, the provider’s qualifications and the scope of the service provider's responsibility? 5) Does the plan have a conflict of interest policy that governs business and personal relationships between fiduciaries and service providers and among service providers? Does the plan require disclosure of relationships, compensation and gifts between fiduciaries and service providers and among service providers? 6) Does a written agreement document the services to be performed and the related costs? B. ADDITIONAL ISSUES WHEN HIRING AN INVESTMENT MANAGER 1) Does the Plan have a Statement of Investment Policy? Some or all of the following issues may be addressed by a Statement of Investment Policy: (See Department of Labor Interpretive Bulletin 94-2.) Evaluation of the specific needs of the plan and its participants Statement of investment objectives and goals Standards of investment performance/benchmarks Classes of investment authorized Styles of investment authorized Diversification of portfolio among classes of investment, among investment styles and within classes of investment Restrictions on investments Directed brokerage Proxy voting Standards for reports by investment managers and investment consultants on performance, commission activity, turnover, proxy voting, compliance with investment guidelines Policies and procedures for the hiring of an investment manager Disclosure of actual and potential conflicts of interest 2) What is the position to be filled? Why is the Plan hiring an additional investment manager? Is the Plan replacing a terminated manager with a manager of the same investment style or hiring an additional manager with a different investment style? Is the hiring of this manager consistent with the Statement of Investment Policy? 3) Does the Investment Manager have the objective qualifications for the position being filled? (See questions concerning qualifications above.) Does the candidate qualify as an investment manager pursuant to ERISA section 3(38)? 4) How does the investment manager manage money? What is the manager's performance record and how does the manager achieve his performance? What are the risks of the investment manager's style and strategy compared to other styles and strategies? Do you understand what the manager does and the risks involved? Is this risk level acceptable in view of the return? How do this manager's investment style and strategy fit into the portfolio as a whole? (See Department of Labor Regulation 29 CFR 2550.404a.1, Investment Duties, and letter from Olena Berg, Assistant Secretary for Pension and Welfare Benefits Administration, to Honorable Eugene A. Ludwig, Comptroller of the Currency concerning the Department of Labor's views with respect to the utilization of derivatives in the portfolio of pension plans subject to the Employee Retirement Income Security Act.) 5) How does the investment manager measure and report performance? Does the process ensure objective reporting? 6) Is the investment manager a qualified professional asset manager? What is the investment manager's process to comply with the prohibited transactions provisions of ERISA? 7) What is the investment manager's process to insure compliance with the plan's investment policy and guidelines? 8) What is the investment manager's record with respect to turnover of personnel? 9) Has the manager's investment style been consistent? 10) Has the investment manager been terminated by plan clients within a relevant time period and why? 11) Has the ownership of the investment manager changed within a relevant time period and how will this affect the ability of the manager to perform the services needed by the plan? 12) What are the investment manager's fees? Are the fees reasonable in comparison with industry standards for the type and size of the investment portfolio? Does the fee structure encourage undue risk taking by the investment manager? 13) Does the investment manager have a personal or business relationship with any of the plan fiduciaries, or with another service provider recommending the investment manager? If a relationship does exist, how does it impact on the evaluation of the objective qualifications of the investment manager and the recommendation? 14) If the plan has adopted a directed brokerage arrangement with a broker affiliated with the plan's investment consultant, how does the investment manager determine when to use broker affiliated with the investment consultant? What are the per share transaction costs? 15) Does the investment manager have insurance which would permit recovery by the plan in the event of a breach of fiduciary duty-by the investment manager? What is the amount of the insurance? Who is the insurance carrier? C. ADDITIONAL ISSUES WHEN HIRING AN INVESTMENT CONSULTANT. 1) What is the role of the investment consultant? Are the investment consultant's duties clearly stated in the Statement of Investment Policy and/or the contract with the Investment Consultant? 2) Does the Investment Consultant: Monitor and advise concerning asset allocation Monitor and advise concerning riskiness of investment strategies, styles and individual investment managers Monitor and advise concerning the performance and riskiness of Investments under the direct investment control of the fiduciaries Monitor and advise concerning the compliance of the investment managers and direct investments with the Statement of Investment Policy and Investment Guidelines Accept fiduciary responsibility in writing for all or some of the services it performs? Does the contract state specifically for which services the consultant accepts fiduciary responsibility? 3) Is the investment consultant's fee reasonable when compared to industry standards in view of the services to Jon C. Chambers Schultz Collins Lawson Chambers, Inc. Investment Consultants
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