PLANSPONSOR - November/December 2024 - 36
PLAN DESIGN
Counting the Costs
W
hile fee compression has broadly reduced the cost
of retirement benefits, basic math still puts smaller
plans-i.e., with up to 100 participants-at a disadvantage.
Larger plans benefit from economies of scale.
Total bundled costs, including investment, recordkeeping
and administration fees, average 4.16% for plans with 10 participants
and $100,000 in assets, compared with 1.62% for plans
with 500 participants and $5 million in assets, says the 401k
Averages Book, 24th Edition.
" If you have a small plan with 10 or 20 employees, you still
have to do the testing and all that, " says Mark Alley, national
market president at Alerus in Minneapolis.
Further, providers may be more willing to lower variable
costs for larger plans, or for plans with fewer participants but
higher balances, since they see a greater potential to cross-sell
and realize other revenue opportunities.
There are, of course, other options for small businesses,
such as a SIMPLE [savings incentive match plan for employees]
401(k) and a SEP [simple employee pension] individual retirement
account plan. Some providers, charge nothing to set up those plans
for the small employer. But any fee nuances can create a challenge
for a small business with no adviser to parse them.
" We see a general confusion, and folks are overwhelmed as
Even with the fees, a 401(k) is a good investment for participant savings
there are a number of options available, " says Roger Morrissette,
vice president of small business retirement products at Fidelity
Investments in Providence, Rhode Island. Fidelity's Plan Selector
tool can help employers clarify the differences, he says.
The SECURE Impact
For employers considering a 401(k), experts say the Setting Every
Community Up for Retirement Enhancement Act and the SECURE
2.0 Act have lowered the cost burden via both tax credits for new
plans and support for pooled employer plans, which let small
employers gain from economies of scale, while also outsourcing
some of the fiduciary risk and time required to run a plan.
For the first three years of a new plan, employers with fewer
than 100 employees can get a tax credit of up to $5,000 per year,
with an additional $500 for setting up automatic enrollment and
a $1,000-per-employee credit for matching contributions made
to non-highly compensated employees.
" Some of the more successful PEPs are leveraging that tax
credit to allow small employers to maybe start up a plan with no
cost at all, " says Ted Schmelzle, assistant vice president of retirement
plan services at The Standard in Portland, Oregon.
From the plan participant perspective, higher fees for small
plans take a larger bite out of savings, but experts say these fees
36 PLANSPONSOR.COM November - December 2024
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PLANSPONSOR - November/December 2024
Table of Contents for the Digital Edition of PLANSPONSOR - November/December 2024
Insights
Participant analysis
Rules and regulations
Upfront
The Retirement Industry 2024
PLANSPONSOR DB Administration Survey
Plan Sponsors in Conversation
Build and Equip
SECURE 2.0’s New Match
2025 ERISA Plan Compliance Calendar
Counting the Costs
A Provision Review
SCOTUS to Decide
Helping Transient Workers Save
PLANSPONSOR - November/December 2024 - Cover1
PLANSPONSOR - November/December 2024 - Cover2
PLANSPONSOR - November/December 2024 - 1
PLANSPONSOR - November/December 2024 - Insights
PLANSPONSOR - November/December 2024 - 3
PLANSPONSOR - November/December 2024 - Participant analysis
PLANSPONSOR - November/December 2024 - 5
PLANSPONSOR - November/December 2024 - Rules and regulations
PLANSPONSOR - November/December 2024 - 7
PLANSPONSOR - November/December 2024 - 8
PLANSPONSOR - November/December 2024 - 9
PLANSPONSOR - November/December 2024 - Upfront
PLANSPONSOR - November/December 2024 - 11
PLANSPONSOR - November/December 2024 - 12
PLANSPONSOR - November/December 2024 - 13
PLANSPONSOR - November/December 2024 - 14
PLANSPONSOR - November/December 2024 - 15
PLANSPONSOR - November/December 2024 - The Retirement Industry 2024
PLANSPONSOR - November/December 2024 - 17
PLANSPONSOR - November/December 2024 - 18
PLANSPONSOR - November/December 2024 - 19
PLANSPONSOR - November/December 2024 - PLANSPONSOR DB Administration Survey
PLANSPONSOR - November/December 2024 - 21
PLANSPONSOR - November/December 2024 - 22
PLANSPONSOR - November/December 2024 - 23
PLANSPONSOR - November/December 2024 - Plan Sponsors in Conversation
PLANSPONSOR - November/December 2024 - 25
PLANSPONSOR - November/December 2024 - Build and Equip
PLANSPONSOR - November/December 2024 - 27
PLANSPONSOR - November/December 2024 - 28
PLANSPONSOR - November/December 2024 - 29
PLANSPONSOR - November/December 2024 - SECURE 2.0’s New Match
PLANSPONSOR - November/December 2024 - 31
PLANSPONSOR - November/December 2024 - 2025 ERISA Plan Compliance Calendar
PLANSPONSOR - November/December 2024 - 33
PLANSPONSOR - November/December 2024 - 34
PLANSPONSOR - November/December 2024 - 35
PLANSPONSOR - November/December 2024 - Counting the Costs
PLANSPONSOR - November/December 2024 - 37
PLANSPONSOR - November/December 2024 - A Provision Review
PLANSPONSOR - November/December 2024 - SCOTUS to Decide
PLANSPONSOR - November/December 2024 - Helping Transient Workers Save
PLANSPONSOR - November/December 2024 - Cover3
PLANSPONSOR - November/December 2024 - Cover4
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