Q: What are some of the employer's expenses in a 401k plan?
A: There are expenses for design, investment, administration, recordkeeping and employee communication. The contributions made by the employer and time spent by company personnel establishing and maintaining the 401k plan must also be considered.
Q: How can 401k plan expenses to outside service providers be controlled?
A: Fees to outside service providers can be controlled by negotiating, switching to other 401k providers, performing tasks in-house, or shifting assessments to employees.
Q: How can 401k investment expenses be limited?
A: 401k investment expenses can be reduced by eliminating unnecessary assessments, such as the contract fees which many insurance companies charge or the wrap-around fees mutual funds impose on funds other than their own. Negotiating with current service providers should always be considered.
Q: How can the employer's contribution be limited?
A: Employers can directly decrease their costs by reducing their 401k contributions. Also, an increase in employee deferral contributions may limit the employer's 401k contributions needed to satisfy non-discrimination requirements. Employee deferrals can be increased by improving employee communication, selecting the most prudent employer matching contribution, providing greater availability for loans and having a mandatory enrollment program.
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