Your experience with installing a 401k?

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Sep 21, 2010 4:31 am

I left a firm where 401ks were not a part of the business model I'd like to hear in as much detail as you can provide your experience in getting a 401k off the ground. What product did you use? What were the technical aspects during the installation? What type of payout did you receive?

Sep 21, 2010 8:07 am

Service Provider should have an Installation Guide detailing
their requirements.  Payouts are generally based on the payouts for the
underlying assets.   Exception 12b-1 fees can be retained by the
Service Provider to offset fees. Generally, the Service Provider retains a Sub
TA fee where the assets are in MF and the Plan maintains Omnibus accounts

WARNING Fees and Compensation are today's red flags. Be sure
to have an Investment Policy and be certain the funds are consistent with the
stated policy. Anything you do in a 401(k) plan must be in the best interests
of the participants. While you may not technically be a Fiduciary, somebody
involved in the process sure is.

Anyway, here's the list.


Selection of model. Bundled or

Selection of service provider Bank,
Ins Co, B/D, MF Co, TPA

Valuation Frequency - Daily,
modified daily (cut offs <> market cut offs), balance forward

Contract/Service Agreement

Establish Trust if any assets are
outside of a GAC

Plan Objectives such as tax
deferral, maximization of $ to Owners/Highly Comensated, qualified (probably if
you're looking at 401(k) plans/non qualified

Plan design

Plan Document; individually
designed, master prototype, or volume submitter. Watch out for cutbacks if this
is an existing plan

Investment Policy

Board of Director's resolution

Enrollment meetings and participant

Counseling with individuals or
individual Q & As

Review of participation %, if too
low, possible follow on set of enrollment meetings.

Communication of new IVR and Web
access requirements to Participants

Submission of payroll deduction
changes gathered in enrollment meetings

Coordination of changeover in
service providers with Payroll (internal or external )

New account set up for pooled assets

New account set up for brokerage
window assets. Be sure to cover brokerage window practices in your investment

Accounting record transfers for existing
plan assets. Account balance data by fund and source.

Current year contribution numbers
for testing purposes. LTD contribution numbers for deferral and after tax
dollars. Pre and post 1986 after tax dollars if the plan maintained its
grandfathered status

Required Minimum Distribution status
and history

Loan balances, amortization
schedules for all existing loans

Partial year 5500 information from
prior service provider.

Blackout communication to

Physical transfer of assets

Build of participant records by new
service provider

of record build and asset transfer

Sep 21, 2010 11:54 am

Are you able to bill fee or are you 100% commish?

Sep 21, 2010 9:09 pm

Good advice from Josephus.

If you think 35 bps isn't going to be enough, or you don't want to offer a plain vanilla plan,  you could set up a separate brokerage account component. If you go with a bundled plan, that might require some jerry rigging. If you go with a TPA open architecture,  or a platform where you an unbundle TPA you can typically do it a little more easily. Set a minimum on the brokerage option - say - 50k and then when people opt for that, you can bill a wrap The TPA piece normally costs more when you opt to do this.

Also set up service expectations - American Funds has a model you can use that your firm compliance team may allow you to use.

Sep 23, 2010 8:31 pm

[quote=Takingnames]Also set up service expectations - American Funds has a model you can use that your firm compliance team may allow you to use. [/quote] Do you have a link to this? I searched their website but I am guessing it is not available to the public???

Sep 28, 2010 11:12 am

what the hell? oh good grief! here we go again.