Not happy with the performance of your current 401(k)? Is it the investment choices? Is it the economy? Is it the plan design? Is it the advisor? Is it due to fees?

Probably.

So many factors work in tandem toward the performance, or lack thereof, of a 401(k) retirement plan. For a 401(k) plan to be successful, all of these factors must work in harmony. Having great returns on investments is useless if the returns are eaten up by fees, and even a good economy cannot fix a poor plan design. As we are approaching the last quarter of the year, pharmacies still have time to make adjustments to their retirement plans to ensure maximum benefits for the 2016 tax year. The following are four basic concepts that should be discussed and applied when optimizing your retirement plan.

Are my investments Prudent?

• Low cost passively managed investments are the key here. Paying someone extra to actively trade or hyper-actively trade in a retirement account does not only cost more, but the vast majority of time, the portfolios underperform the index or benchmark.

Have I benchedmarked fees this year?

• It is important to look at all fees in and out of the investments as a whole.  Some advisors and/or brokers will label and list these differently in an effort to confuse and mislead. These fees include things like:
  • Administration costs
  • Weighted Average expense ratio of funds
  • Advisor fees
  • Record keeping fees
  • Plan design/amendment change fees
  • Legal and fiduciary fees
  • Any other fees or dollars that are not going toward the overall increase of assets in the plan.

Does my advisor take the time to review other plan design options as my pharmacy grows?

• It’s true. The only thing that is constant is change. As pharmacy owners, pharmacies, and the healthcare sector in general grow and change, so must retirement plans. It is important to review different strategies with an advisor every year to ensure maximum benefit and goals are being met.

What are my legal responsibilities as a fiduciary?

• As a Plan Sponsor of a 401(k) plan, there is no way to escape that you are legally responsible to act in the best interest of your employees. You are a fiduciary. By appointing a 3(38) investment fiduciary, the Plan Sponsor is relieved from all fiduciary responsibility in regards to investments made. The advisor now is required by law to act in your best interest. The 3(38) investment fiduciary provides you, as the owner, with protection against lawsuits based on investment decisions. Beware of impostor statements like 3(21) investment fiduciary. An easy way to see if you are covered is to ask your advisor or broker to send a signed letter stating that they are a fiduciary on your 401(k) plan and define what that means.

These are basic concepts that every Plan Sponsor should take the time understand. While time is a valuable thing, setting up the right plan to meet your goals in life and business is time well spent. Adjusting and understanding these four points discussed can allow you to develop a plan to meet your retirement goals while providing a better way to attract, retain, and reward your most valuable employees. If you, like many others, are ready to fix or optimize your current plan, please contact me at tyler@waypointus.com or visit our website at www.pharmacy401k.com.