LUTZ BUSINESS INSIGHTS
DECEMBER RETIREMENT PLAN NEWSLETTER
EXCHANGE YOUR OLD RETIREMENT SOLUTIONS FOR NEW ONES
JONATHAN COOMBS, INVESTMENT ANALYST
What is an Exchange?
An exchange is a turnkey solution for businesses that allows you to provide the benefit of a retirement plan while offloading much of the administrative and fiduciary responsibilities at a potential cost reduction. A team of professionals work together on your behalf so you can focus on running your business, not your retirement plan.
An exchange is a great way to help your employees reach retirement readiness by providing them with a savings vehicle like a 401(k) plan, but with less administrative burden and by transferring certain risks.
Fiduciary Risk Mitigation
The fiduciary has a legal obligation to carry out its plan responsibilities with prudence, good faith, honesty, integrity, service and undivided loyalty to beneficiary interests – in this case, retirement plan participants. When joining an exchange, a fair amount of fiduciary responsibility is taken off your hands.
Employers oftentimes don’t have the resources to effectively manage the complex requirement of administering a qualified retirement plan. With an exchange all plan administrative duties can be outsourced – a benefit typically only available to very large companies.
There’s strength in numbers. By teaming up with other businesses in an exchange, you can benefit from economies of scale and seamless processing that help reduce the costs associated with operating and maintaining a retirement plan.
For more information on exchanges, please contact your plan advisor.
About the Author, Jonathan Coombs
Jonathan provides guidance to plan sponsors across the country on retirement best practices regarding fee benchmarking, investment analysis, plan design, fiduciary compliance and participant outcomes. As an asset allocation specialist, Jonathan project manages key business development initiatives in the custom solution arena. He also serves as a fixed income analyst. Jonathan attended The Julliard School, where he obtained a Bachelor of Science in music and a Master of Music.
Welcome to Hey Joel! This forum answers plan sponsor questions from all over the country by our in-house former practicing ERISA attorney.
Should I distribute the Fiduciary Investment Review to plan participants? – Generous in Georgia
I appreciate your desire to provide detailed information to your plan participants, but hold your horses. While there is nothing legally preventing the sharing of the Fiduciary Investment Review (FIR) with participants, we do not recommend it and, in fact, strongly discourage it. The FIR is designed for delivery to fiduciaries, not participants. This is not only because the fiduciaries are more sophisticated but because the report is better understood (I would even say, only understood) when presented/explained by an advisor that knows the data. The average participant may be alarmed by watchlisted funds and take inappropriate action (i.e., remove them from his/her portfolio when that’s not the recommendation.) Further, we fear that participants will move all their money into the funds scoring 9 or 10 and as you can imagine, doing so would ignore the critical strategy of diversification. Instead of sharing the report itself, I always recommend an employee communication from the plan sponsor. Something like – “Hey employees, the company has met with our plan advisor to review the plan investments and all is doing great. We take the monitoring seriously, we do it regularly and will let you know when/if a change is needed… Until then, don’t forget to join, increase your deferral, diversify, etc, etc.” No need to create alarm unnecessarily.
Always here to give advice,
About Joel Shapiro, JD, LLM
As a former practicing ERISA attorney Joel works to ensure that plan sponsors stay fully informed on all legislative and regulatory matters. Joel earned his Bachelor of Arts from Tufts University and his Juris Doctor from Washington College of Law at the American University.
PARTICIPANT CORNER: HOLIDAY BUDGETING
This month’s employee flyer gives participants tips for budgeting during the holiday season. Download the flyer from your Fiduciary Briefcase at fiduciarybriefcase.com. Please see an excerpt below.
The holidays are a time for giving, but often people can be a little overgenerous during this time of year and later find themselves in financial trouble. Consumer counseling agencies see a 25 percent increase in the number of people seeking help in January and February, mostly by people suffering from an influx of holiday bills.¹
Here are our top tips for saving money during the holiday season:
1. Create a Holiday Budget
Monthly Income – Monthly Expenses = Your Holiday Budget
Make a list of everyone you will buy for and how much you will spend on each person, then stick to it!
2. Pay with Cash
When you pay with cash, you can get a better handle on how much you’re spending. You’re forced to stick to your budget, because you can’t spend cash you don’t have!
3. Pay with Gift Cards
There are websites and stores where you can purchase gift cards at a discounted price. Shop with them and you’re automatically saving money. Shop for items on sale or at a discount store and save even more money!
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Lutz Financial (“Lutz”), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Lutz. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Lutz is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Lutz’s current written disclosure Brochure discussing our advisory services and fees is available upon request. Please Note: If you are a Lutz client, please remember to contact Lutz, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Lutz shall continue to rely on the accuracy of information that you have provided.
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RECENT LUTZ FINANCIAL POSTS
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Each morning I craft a Market Update email that I share with our advisors. This email provides commentary on what is happening in the markets and the economy. It includes data related to asset class…
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