From law suits to consolidations, a confluence of events is triggering dealers to reassess their retirement plan programs.
From law suits to consolidations, a confluence of events is triggering dealers to reassess their retirement plan programs. The first one is a recent Supreme Court decision that ruled against plan trustees for excessive fees. Then, consolidation in the benefit industry is shuttering some record keepers and forcing some dealers to choose a new plan administrator in 2015. A third reason is perhaps more important than the other two combined: Assessing the health of your dealer retirement plan is a best practice for your business and for the program participants. Here are some issues to consider.
Dealership retirement plan fees must be reasonable — it’s the law
Retirement plan trustees are responsible for reviewing overall plan fees to determine if they are “reasonable.” These requirements are not new since the fee disclosure regulations were issued by the Department of Labor (DOL) in 2012. But several court cases seem to be reaffirming that retirement plan trustees have an ongoing obligation to monitor investments — particularly how much they cost.
One way to assess your plan’s fees is to benchmark them to similar-sized plans in the dealership industry and elsewhere in the country. A benchmarking study gives you credible evidence that should demonstrate that your fees are reasonable.
Improve your dealership’s qualified retirement plan
Ask yourself if your benefit plan is doing everything it could. Start with the basics, review the plan features, and look for ways to make improvements.
- Are you getting the maximum deductions and allocations?
- Are highly compensated employees regularly getting refunds of some of their 401(k) deferrals?
- Should you add an “auto enrollment” and/or “auto escalate” feature?
- Do the eligibility criteria still work for your current employee mix?
- Should you add provisions, such as a Roth deferral or in-plan Roth conversion?
- Have you considered a rollover provision for non-spousal beneficiaries?
- What are the benefits of modifying the vesting schedule?
- Does the plan have a loan provision? If so, are employees using it? If not, should you add one?
Some of these questions are not easy to answer and may require you to poll your current participants and analyze various scenarios.
Review your dealership’s qualified retirement plan for effectiveness
CLA offers complimentary resources that will help you examine the effectiveness of your plan.
- Our retirement plan check-up looks at the current plan design to see if it is accomplishing your goals.
- The Retirement Plan Diagnostic Report addresses your fiduciary responsibilities and gives you a benchmark for how your fees stack up to other plans.
- If your fees look high, we can run a Retirement Plan Efficiency Analysis (RPEA) to illustrate how an alternate recordkeeping and investment platform could reduce fees while maintaining or improving the plan’s benefits and features.
Whether your retirement plan checkup results in a new plan sponsor, or reinforces your choice, what’s most important is knowing whether the plan has been doing everything possible for your dealership and your employees. Even if the plan has been performing as intended, there may be opportunities to make it do more, and cost less.