Case Study: Reviewing and Improving an ESOP Company’s 401(k) Plan

SES Advisors was hired to consult for an ESOP company’s 401(k) plan. The ESOP company had specific items it wanted to incorporate into the 401(k) plan:

  • Incorporate ESOP values into the 401(k) statements or participant website
  • Provide full revenue disclosure of fees
  • Supply useful online tools and increase onsite employee education
  • Deliver simple to understand, managed accounts for participants
  • Use a flexible investment architecture with limited proprietary requirements
  • Lower overall plan cost, if possible

Step One:

  • SES Advisors worked with the current 401(k) provider to disclose current 12b-1, Sub TA, shareholder and other internal fees
  • Installed an Investment Policy Statement
  • Consulted with the company to review the current investment options to streamline the fund lineup to make it easier for the employees to understand
  • Added passively managed funds and replaced funds that didn’t meet the IPS standards
  • Reviewed all the options available under the current provider that were appropriate for the Qualified Designated Investment Alternative and changed the default option from cash to a balance fund
  • Rolled out the fee disclosure and changes to the plan in a group presentation for all employees

Step Two:

  • Conducted a Request For Proposal process to document that plan fees are reasonable and competitive
  • Reviewed eight providers that could offer the services that the client was looking for in its dream 401(k) plan
  • Reviewed the results with the client and the current 401(k) provider; current provider could not provide all the services that the client was requesting and the RFP found other, less expensive 401(k) providers that could

Step Three:

  • Documented all the changes and processes and loaded all the plan info on client’s online portal

Conclusion:

  • Employees receive ESOP values on the 401(k) statements and participant website
  • Reduced the conflicts of interest attached to the 401(k) plan
  • Built a new fund lineup that offers more diversification with fewer options and designed four custom portfolios for the employees to choose from
  • Increased employee education through onsite meetings, webinars, online tools and individual investment advice
  • Reduced the expenses paid by the employees from 1.05% to 0.73%—without adding expenses to the company

Ready to Move Forward?

If you would like to learn more about how SES Advisors can help you optimize your company’s 401(k) plan, please contact us.

Consult your advisors for up-to-date legal and tax information. IRS CIRCULAR 230 DISCLOSURE: Pursuant to Treasury Regulations, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used or relied upon by you or any other person, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any tax advice addressed herein. Please contact a member of the firm if you require a formal, written tax opinion that satisfies applicable IRS requirements.

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