Building a Retirement Plan from Scratch

When deciding how to best structure and monitor the retirement plan, employers can benefit by asking themselves:  What if they were building their plan from scratch?  Here are some more specific questions to consider:

1. How should the fund line-up be designed?  Is there an ideal number of funds to have that will maximize participation and minimize confusion?  Do you believe in offering actively managed funds to give participants the opportunity to “beat the market”?  How likely are they to accomplish this goal?  Should participants have access to a self-directed brokerage account so they can each have the ability to choose any fund they want?
2. What steps can be taken to make sure that the participants properly utilize the investment options?  For example, if you have target date funds, are participants using the funds correctly as stand-alone options, or are they choosing other funds in addition to the target date funds?  Are participants mistakenly choosing highly correlated funds falsely thinking that more funds will make their portfolio more diversified?
3. What criteria should you use to choose your service providers such as the custodian, record keeper, administrator, and advisor?  Years of experience?  Number of plans?  Assets under management?  Ability of the representatives to relate and connect with your participants? (this is especially important)  Quality of the website?  Employee and client turnover?  Average employee tenure?  Effective utilization of technology?  Access to a dedicated support specialist instead of an 800 number? (for the record keeper)
4. How much of an issue is fiduciary liability for your business?  What kinds of fiduciary liability exist, and which are most significant?  What steps can you take to protect yourself against fiduciary liability?
5. How should the service fees be structured?  Asset-based?  Flat fee per participant?  Flat fee based on service time?
6. Should the company write a check for the service fees or pass them on to participants?  If the fees are passed on to participants, should they be passed on equally or in proportion to the account balances?
7. How can you best create a retirement plan to motivate, attract, and retain valuable employees?  Should you offer a profit sharing contribution and a match?  If so, what is the best way to design a match?  Should you offer a non-qualified deferred compensation plan in addition to the defined contribution plan that specific benefits key employees?  If so, how should this plan be funded?  Would it make sense to offer a defined benefit plan as well?
8. What is the best way to communicate the benefits and costs to the participants?  E-mail?  Webinar?  Face-to-face group meetings?  Face-to-face one on one meetings?  How much do your employees appreciate the benefit of the retirement plan?  What steps can you take to increase their understanding and appreciation of this benefit?
9. What are the primary factors that affect the ability to retire comfortably?