How Does It Work?
A Department of Labor provision allows trade association to create an Association 401k Plan comprised of association member 401k plans organized and administered as a single group plan. If an Association 401k Plan is set up well, association members enjoy the benefits of bing part of a bigger 401k plan.
What Are the Benefits to Association Members?
Administrative Ease
- Association members who currently sponsor their own 401k plan or who have been reluctant to offer a 401k plan no longer need to do most of the administrative tasks typically required of 401k plan sponsors. These day-to-day repsonsibilities get shifted to the Association or Chamber of Commerce 401k Plan.
Cost Savings
- Administration, recordkeeping, advisory, and investment costs are spread across all adopting employers' plan assets. This combined purchasing power drives down costs.
- Larger employers (more than 100 eligible employees) no longer need to complete and pay for an annual audit.
Fiduciary Relief
- Adopting employers are relieved of many of their fiduciary duties.
Who Helps the Association?
Associations usually hire third party vendors to help administer their 401k plan correctly and to handle most of the day-to-day duties. Below are common vendors who provide support:
Plan Administrator Fiduciary
A Plan Administrator Fiduciary acts as a surrogate plan sponsor, typically taking care of the following tasks:
- Making sure the plan is in compliance
- Taking care of plan amendments and plan document restatement requirements
- Taking care of sending out required notifications and disclosures
- Authorizing and administering loans
- Taking care of distributions
- Preparing, signing, and filing the annual Form 5500
- Coordinating the annual audit
- Monitoring plan activities
- Monitoring contribution activity to make sure contributions are bing made in a timely manner
- Informing the association of any issues with adopting employers
Investment Fiduciary
Associations generally hire one of the following fiduciaries to help with the plan's investments:
- A "3(21)" Investment Fiduciary provides investment recommendations for the plan, but the plan sponsor makes the final decisions and is responsible for overseeing the hired professional.
- A"3(38)" Investment Fiduciary has the discretion to create and maintain the plan's investment menu. The plan sponsor gives up the ability to make investment decisions but is still responsible for overseeing the hired professional.
Service and Education Provider
Associations generally hire a third party to service the plan and provide in-person support:
- Plan design consulting
- Recommending and monitoring of service providers
- Fee benchmarking and oversight
- Liaison between the association and the 401k plan administrator and recordkeeper
- Liaison between the association and its members
- Participant enrollment
- Participant education
- Financial wellness and retirement planning support
- Local point of contact
Navigate Financial can establish and manage a 401k plan for your association!
Give us a call at 801-905-1644 to get started today!