Reviewing Your 401(k) Plan Expenses
Learn the key steps to review and manage your 401(k) plan expenses responsibly. Ensure compliance with ERISA's Duty to Prudence, compare fees, evaluate investment options, and optimize administrative costs to operate in the best interests of your plan participants.
As a plan sponsor, you have a fiduciary responsibility to make sure your 401(k) plan is operated in the best interests of participants. You have the Duty to Prudence under ERISA to make sure you’re periodically reviewing costs and service.
Depending on the size of your plan, it may be easy to do it on your own, or you can hire someone to help. Here are some steps you can take:
1. Download a Fee Disclosure from your Service Provider.
Log into your plan and download a detailed fee report
Understand how you’re charged: Are you charged per participant or as a percentage of assets? What fees are normal vs extraordinary?
Compare fees: Compare the fees you're paying to industry benchmarks.
2. Review Your Plan's Investment Options:
Evaluate expense ratios: Compare the expense ratios of different investment options within your plan.
Consider index or target date funds: These funds may have lower costs. For a detailed review of Target Date Funds, please refer to the Department of Labor’s “Target Date Retirement Funds: Tips for ERISA Plan Fiduciaries”
Monitor investment performance: Ensure that the investments in your plan are performing well and are in alignment with your Plan Document.
3. Analyze Plan Administration Costs:
Review service provider contracts: Examine the terms of your contracts with service providers to understand the fees they charge.
Consider alternative providers: Shop around for potential cost savings.
Optimize administrative processes: Look for ways to streamline administrative tasks and reduce costs.
4. Utilize Fee Benchmarking Tools:
Use industry benchmarks: Compare your plan's fees to industry benchmarks to identify areas for improvement.
Consider third-party advisors: Financial advisors can help you assess your plan's fees and identify potential cost savings.
5. Regularly Review and Rebalance:
Monitor plan performance: Ensure that your plan is meeting its investment objectives.
Rebalance investments: Adjust the asset allocation as needed to maintain your desired risk level.
Evaluate plan design: Periodically review your plan's design to ensure it remains effective and cost-efficient.
For a detailed review of these items, please refer to the Department of Labors, “Meeting Your Fiduciary Responsibilities”
How to Easily Make Sure Your Bank Deposits are Protected
Ensure your bank deposits are protected with this easy guide to FDIC insurance. Learn what the FDIC does, the difference between insured and uninsured accounts, and how to use tools like the EDIE calculator to safeguard your money. Stay informed and take steps to secure your financial future.
When it comes to safeguarding your bank deposits, we first need to understand the Federal Deposit Insurance Corporation (FDIC). The FDIC is the government entity insuring your deposits.
It was created in 1933 in response to the stock market crash of 1929. The FDIC has played a pivotal role in maintaining public confidence in the U.S. financial system. We’ll explore what the FDIC does, the difference between insured and uninsured accounts, and the tools available to ensure your deposits are protected.
What Is the FDIC?
The FDIC is a U.S. government agency that insures deposits in banks and savings associations. It was established to promote stability and public confidence in the financial system. Since its inception, the FDIC has guaranteed a 100% payout on insured deposits. Here’s what you need to know about its functions:
Insurance for Bank Deposits: The FDIC protects bank depositors by providing insurance on deposits up to a certain limit, typically $250,000 per depositor, per insured bank, for each account ownership category.
Bank Creation, Regulation and Monitoring: The FDIC assesses banks to ensure they comply with regulatory standards. This includes approving lending plans and scrutinizing the operations of new banks.
Handling Bank Failures: In the event of a bank failure, the FDIC steps in to ensure that customers receive their insured deposits efficiently and looks for ways to pair account holders with viable financial institutions.
Insured vs. Uninsured Accounts
Did you know that 47% of all deposits are uninsured? If your deposits are uninsured and your bank collapses, it’s not guaranteed that you’ll get your money back.
Insured Accounts: These accounts are protected by the FDIC up to $250,000 per depositor, per insured bank, for each account ownership category. This includes savings accounts, checking accounts, money market deposit accounts, and certificates of deposit (CDs).
Uninsured Accounts: Deposits exceeding the FDIC insurance limit (usually $250,000 per person) and certain types of investments, such as mutual funds, stocks, and bonds, are not covered. About 47% of bank deposits are reportedly uninsured, often concentrated in specific industries.
Tools to Check Account Protection
To help ensure your deposits are adequately insured, the FDIC provides a few tools:
EDIE (Electronic Deposit Insurance Estimator)
The FDIC’s EDIE tool allows you to calculate the insurance coverage for your accounts at each FDIC-insured bank. You can easily visit the website and input the details of your accounts to see how much is covered.
EDIE - Electronic Deposit Insurance Estimator - https://edie.fdic.gov
On this website, you’ll enter the title of the account (individual, joint, trust, etc) and the amount in each account. The calculator will tell you how much of your deposits is insured vs uninsured.
SIPC (Securities Investor Protection Corporation)
While the FDIC covers deposit accounts, the SIPC offers limited protection for securities and cash held in brokerage accounts. It covers up to $500,000, which includes a $250,000 limit for cash claims.
SIPC - https://www.sipc.org
Being aware of the protection limits and tools offered by the FDIC is a part of responsibly managing your finances. By using resources like EDIE, you can gain peace of mind knowing that your deposits are secure. Always consider diversifying your funds to minimize risk, and stay informed about the different types of accounts and their coverage.
Knowledge is your best asset in financial planning, and taking proactive steps to safeguard your deposits can help ensure your financial stability and peace of mind.
To hear more on this topic, listen to the ME Financial Podcast Episode 27 on the FDIC and your money.
