Recordkeeper for Balance Forward 401(k) Plan

[Christopher Wilson]

Hello. I hope this post finds you and your loved ones healthy. I currently have a balance forward 401(k) plan, and I'm looking for a recordkeeper that has a platform which would permit participants to select a risk-reward portfolio instead of individual mutual funds. The plan sponsor would construct the portfolios using the recordkeeper's mutual funds. The participants wouldn’t direct the investment of their separate account, but rather they would select a portfolio. Participants's accounts would be updated daily. Thank you.

[Larry Starr]

2 hours ago, Christopher Wilson said:

Hello. I hope this post finds you and your loved ones healthy. I'm looking for a recordkeeper that has a platform for balance forward 401(k) plans. I was informed a few years ago that such a product existed, but I don't know if what I was told was true or if such a product exists today. The participants wouldn’t direct the investment of their separate account, but they could select from among three or four different risk-reward portfolios constructed by the plan sponsor using the recordkeeper's mutual funds. Participants's accounts would be updated daily. Thank you.

By definition, that is NOT a balance forward plan; you specifically say it would be updated daily.  What are you really trying to ask?

What you are describing IS an individually directed plan with participant selection of investments. Selecting from different offered investment options IS participants directing their investments.  Your premise regarding balance forward makes not sense.

Any platform should be able to do this; I of course would not think of recommending such an option but that's a whole other discussion and not for this thread.

[Mike Preston]

3 hours ago, Christopher Wilson said:

Hello. I hope this post finds you and your loved ones healthy. I currently have a balance forward 401(k) plan, and I'm looking for a recordkeeper that has a platform which would permit participants to select a risk-reward portfolio instead of individual mutual funds. The plan sponsor would construct the portfolios using the recordkeeper's mutual funds. The participants wouldn’t direct the investment of their separate account, but rather they would select a portfolio. Participants's accounts would be updated daily. Thank you.

Larry is tired.  Frankly, after all the effort he has spent on PPP this last week I'm surprised he isn't sleeping. :-)

I read the OP as saying that he happens to have an existing plan that is balance forward, to date.  They want to move to individually directed with daily recordkeeping with a twist.  Instead of providing participants with a menu of mutual funds he wants to create a set of investment options where each option is professionally crafted and managed by an investment professional.  Setting aside the fact that this design is very difficult to implement (from a fiduciary perspective) there is nothing wrong with the concept.  I would be surprised if many of the recordkeepers in today's market can accommodate this construct.  Instead, a big investment house is more likely to have created proprietary funds that are close.  In short, the OP is trying to re-invent something which already exists.  And if they were the size of, say, Boeing, they might just find an investment house/recordkeeper platform willing to create exactly what he is looking for.  Otherwise, the fiduciary risk to implement this on his own is off the charts and makes no sense in today's marketplace.  I'd be interested in @Peter Gulia's take on the fiduciary issue.

[Peter Gulia]

The investment alternatives described above can work (or can do harm).  It depends on the retirement plan’s circumstances; good fiduciaries, including plan administrator, plan trustee, plan investment adviser, investment trustee, and investment manager; good service providers, including (at least) recordkeeper and certified public accountants.

 

Christopher Wilson, I might be in a position to give you useful information if we talk so I rule out client conflicts.

[Larry Starr]

2 hours ago, Mike Preston said:

Larry is tired.  Frankly, after all the effort he has spent on PPP this last week I'm surprised he isn't sleeping. ?

I

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[Bill Presson]

If I remember correctly Mid Atlantic used to do something like this in conjunction with TPA firms that did in house daily val.

[Pam Shoup]

Without discussing IF this should be done, there are two ways this can be handled.  The first way is through the use of fund models, that are a "Fund of Funds" which are available in the plan.  The available software for this is clunky and we have a few plans using this approach (in conjunction with allowing participants to choose from the underlying funds), but we will not be adding any new plans.  The other way is through the use of a "fund" setup on the trading house platform.  The investment advisor chooses the underlying funds and does the trading, and the share prices are reported back as it's own CUSIP.  MidAtlantic calls it ModelXchange and Matrix uses Model Toolkit.  The underlying investments in these models are not necessarily investment alternatives available in the plan.  The plans have a variety of other investment options available, including the model funds.  There is some additional costs to run the models, but we have several plans that use them.  It also comes down to what the broker-dealer of the RIA will allow them to do too.  The RIA also needs to be involved in what is reported on the plan's 404a-5 notice, etc. There is a lot of liability for the RIA so expect to pay their fees accordingly.  I do not believe that a plan sponsor is able to run these funds directly.  

[Luke Bailey]

This has been thought of before, and implemented in varying fashions. I think a big problem with the concept is that it does not fit within either the classic ERISA 404(c)(1)(A) self-directed or the "new" 404(c)(5) default investment safe harbors.

[Mike Preston]

23 hours ago, Larry Starr said:

???

Your emoji's are also tired!   Or, they at least appear to be taking a nap. :-)

[Larry Starr]

13 hours ago, Mike Preston said:

Your emoji's are also tired!   Or, they at least appear to be taking a nap. ?

Shhhhhh....you'll wake us ALL up!