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Your experience with installing a 401k?

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Sep 21, 2010 8:31 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 12:07 pm

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 Unbundled

·         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 enrollment

·         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 policy

·         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 participants

·         Physical transfer of assets

·         Build of participant records by new service provider

·         Audit/review of record build and asset transfer

Sep 21, 2010 3:54 pm

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

Sep 22, 2010 1:09 am

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 24, 2010 12:31 am

[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 3:12 pm

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