Seven Questions to Ask Your Pension Plan Administrator
Business-Journal.com Getting Ahead
Your 401(k) pension plan is one of the best ways to build personal wealth and defer taxes. But you must take action to maximize its value to you and every employee in your company.
"If you want to get the most from your 401(k) plan -- both as an investment vehicle and tool to retain good employees -- make sure you or your plan administrator asks the following seven questions," urges Bruce Fenton, founder of Atlantic Financial Inc., Wellesley, Mass.
Does your plan provider offer professional counsel on assets within the 401(k) plan?
"Employee education benefits top management," Fenton says. "The amount of money upper-level management and owners can contribute to their 401(k) plan is based on the level of participation by lower paid workers. This is a powerful incentive, and many companies match contributions to encourage worker participation."
Still, eligible employees often fail to take part out of ignorance. "Insist on a plan provider who offers professional financial counseling to help workers understand how their 401(k) provides retirement income and can help finance their children's education or come up with a down payment on their first home. The more workers know about 401(k) benefits, the more they participate."
When it comes to managing assets outside the 401(k) plan, does your provider offer professional investment counseling to every employee?
"Most workers and company owners alike have investments outside their 401(k) plan," Fenton says. "They need professional financial advice to help integrate their portfolio so that all their investments are properly diversified and selected with their age, risk tolerance and goals in mind. Make sure your provider offers this advice on an individual basis -- mass meetings with other employees present are no place to discuss personal finances."
Is your provider independent?
When it comes to recommending a family of mutual funds that are right for your company, an independent firm is in a much better position to be objective and offer a larger, more diverse selection of investments, Fenton maintains. "Independent firms are not biased toward their own products -- one size does not fit all," he says.
Is there sufficient diversity among the mutual funds in your plan?
Make sure the mutual funds in your plan are diversified, Fenton advises. Funds should include all the major investment categories -- large-, mid- and small-capitalization stocks, bond funds, global stocks and balanced funds. "State-of-the-art 401(k) pension plans have a self-directed brokerage option with up to 8,000 choices," he adds.
Do you have instant access to information?
"Watching your assets grow is a big boost to morale," Fenton points out. "Make sure your plan provider makes timely reports available on portfolio performance through phone keypad, voice recognition or Internet access. With today's technology, there is no excuse for plan providers to limit you to recent out-of-date printed statements in the mail."
Are the mutual funds performing well over the long term?
Performance must be evaluated periodically, Fenton emphasizes. "Focus on long-time growth," he says. "Weed out funds that under perform."
How do administrative costs compare to the competition?
"Administrative costs are coming down," says Fenton. "If you started your plan five or more years ago, you could be paying more than today's going rate for comparable service. Check the competition -- you may discover newer plans that better meet your needs at lower cost. Be sure to ask, however, whether your plan provider will waive administrative fees once you reach a certain asset or participant level."
Atlantic Financial Inc. has clients nationwide and the first full-service investment to establish a Web site.
Visit Atlantic Financial Inc. on the Web: www.atlanticfinancial.com/