We receive a lot of inbound inquiries from financial advisors and CPAs asking us to review their client’s retirement plans. The scenario below is representative of an inquiry we received from a financial advisor who took on a new law firm client. During the advisor’s onboarding process, they discussed the law firm’s current 401k plan and reviewed the historical contributions and current account balances. The current 401k provider was one of the “all-in-one” 401k providers that tightly aligns themselves with the newer payroll companies such as Gusto, Rippling, etc. The tagline of “set up your plan in 15 minutes!” was probably heard during their onboarding. To get a second opinion, the advisor sent the plan over to us.
Good thing that we got the referral! Upon initial review, we noticed several issues, including:
- The Plan Document was set up incorrectly. On our initial intake form, one of the new owners of the business was listed as actively making deferrals. We then confirmed this with their W-2. However, based on their date of hire, this new owner was not eligible to enter the plan until the following year. Clearly, the Plan Document was coded incorrectly, or the automated “compliance” checks were not working. But no one had been monitoring the situation
- There were more than 10 employees, yet an incorrect automatic enrollment provision was selected so it would not satisfy the recent automatic enrollment mandates of SECURE 2.0
- The plan design was a simple Safe Harbor Match (probably the only option presented by the “all-in-one” provider), yet the main owner expressed a desire to increase his own retirement savings and better optimize his tax situation
Unfortunately, errors and poor plan design are the norm rather than the exception when taking over plans from payroll companies and bundled providers.
With our team of retirement plan experts, we iterated on several plan designs and eventually settled on changing the safe harbor type and adding in profit sharing with an allocation formula that most benefited the main owner. Overall, the increase in tax savings was multiples more than the incremental fees paid to Pension Source vs. the prior provider. On top of that, we are actively moving the plan to a new recordkeeping platform that offers 360 payroll integration and a wider selection of funds.
For the client, it was a big win:
- Increased retirement savings for the business owner and a reduction in their total tax liability
- No additional administrative hassle given the plan stays on a 360 payroll-integrated recordkeeping platform
- They now receive a white-glove customer service experience with a dedicated Pension Source Plan Administrator to service them going forward
For the advisor:
- They looked great in front of a client by bringing them a tangible benefit soon into their new relationship
- Increased contributions into the retirement plan means increased AUM!
In a self-service, chatbot driven industry, we remain committed to offering a white-glove, people-first customer experience. If you or your clients want a tailored tax-advantaged retirement plan that is low-hassle, please reach out to The Pension Source.
We’re excited to serve you.
Note: The above case study reflects anonymized company data and is illustrative of the types of clients and opportunities The Pension Source routinely evaluates.
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