The 7 Questions To Ask Any 401(k) Plan Provider

And the Land Mines You Should Watch Out for Before Starting a 401(k) Plan at Your Company

Prior to enrolling in a retirement plan you'll need to have a thorough understanding of programs, options and costs. And selecting the right 401(k) partner will insure a successful program and avoid being charged excessive fees, participating in poor performing plans or worse-having your business open to a law suit.

Before you meet with a 401(k) provider, arm yourself with the 7 questions below to ask them so you can decide which plan is right for your business.

• Which Plan will make you do all the Paperwork?
• How to tell which Plan increases your risk of a law suit?
• What questions to ask to uncover Hidden Costs, High Set-up Fees and Excessive Sales Charges?

Executive Summary

Improper administration can lead to a reduction in participation, mistakes resulting in penalties or the loss of the plan's tax status. Though 401(k) arrangements should be designed to meet employer objectives, more complex plan designs often yield administrative difficulties, hidden costs and excessive fees.

If a business selects a "bundled" service provider, they should be aware many providers are primarily interested in the management of assets and lack the expertise in administration and implementation of a successful plan. Be sure and ask for an administrative manual from each plan provider to see who is responsible for each 401(k) administrative task.

BE PREPARED TO ASK THESE QUESTIONS:

1. What Investment Companies Do You Use or Link To?

   Land Mines to Watch Out for:

   Investment flexibility is always a major consideration when evaluating retirement plans. You need to be sure your 401(k) provider offers solid funds in each of the various stock, bond and cash equivalent investment categories.

   The PrimePay Answer:

   PrimePay has access to over 3,000 funds from 30 plus Mutual Fund Families including, but not limited to, American Funds, AIM Funds and Oppenheimer Funds. To reduce participant's expenses, all Funds can be purchased and redeemed without sales charges.

2. What are Your Costs - Administrative and Investment Related?

   Land Mines to Watch Out for:

   Wouldn't you look under the hood before buying a car-or pay someone else to do that for you? Why should your 401(k) Plan be any different? There are several ways to charge for fees in a 401(k) Plan. In addition to a flat fee, providers often charge per head fees, on an annual basis, or an asset related fee which has a negative impact on a participant's assets annually. Over time, this could cost a participant thousands of dollars. What's worse, as assets grow, their fees will increase.

   The PrimePay Answer:

   Like per check charges for payroll services, PrimePay believes that 401(k) administration is a service that warrants a fixed charge based on the size of the company, NOT a fixed percentage on the size of the assets. PrimePay charges only a flat fee, starting as low as $65 per month, regardless of the assets in the plan. Everything you would need in a 401(k) Plan is included in that price.

3. How "Bundled" is Your 401(k) Package?

   Land Mines to Watch Out for:

   There are several ways to have a 401(k) Plan serviced-"bundled" or "unbundled". Most business owners end up with an "unbundled" package. That is where you hire up to 4 different companies just to service a single 401(k) Plan. Think about it, most plans require you to involve an administrator to perform year-end testing, a mutual fund company that will offer recordkeeping services, a financial advisor to communicate the plan and your payroll company to help with reports. That's a total of four different companies to run one plan. A "bundled" plan is much more efficient. That is where one company is hired to handle all aspects of the administration and management of your 401(k) Plan.

   The PrimePay Answer:

   At PrimePay, we offer a "bundled" package. Everything is accomplished through a single, seamless process. Administration, 5500 preparation, investment programs, recordkeeping and payroll related functions are all handled by PrimePay. Instead of dealing with several different people to get questions answered, you have a single point of contact to handle all aspects of the plan.

4. Does Your Plan Address the Liability Issues Directed at Business Owners Who Sponsor 401(k) Plans?

   Land Mines to Watch Out for:

   Fiduciary liability is one the biggest concerns business owners face today when thinking about starting a business sponsored retirement plan. Steps can be taken to reduce one's fiduciary liability but all business owners are ultimately responsible for their Company's Qualified Retirement Plan. Even today, most 401(k) providers avoid taking responsibility in any area that can open them up to liability.

   The PrimePay Answer:

   No 401(k) Plan provider can reduce your risk more than PrimePay. We do this by taking responsibility of withdrawing employee contributions from your payroll account every pay period and wire those funds directly to the mutual fund options each participant selected. No longer can an employee blame you for hanging onto their funds too long or accuse you of using their funds for other purposes. Only a payroll service can offer this type of assurance.

   PrimePay can also develop a "Written Investment Policy Statement" for your plan. This document outlines the due diligence used in selecting your investment menu and describes how you should monitor your funds on an ongoing basis.

5. How Easy is the Management of My 401(k) Plan?

   Land Mines to Watch Out for:

   Today, many 401(k) providers advertise their service as "turnkey". This implies your plan runs independent of you and that nothing more is required to maintain the plan going forward. Financial advisors and other 401(k) sales executives want you to believe this, but it's simply not true. Every pay period, business owners must submit a detailed report to their provider in order to get participant contributions processed. This process is time consuming and usually delays the purchase of your investments.

   Some areas of a 401(k) Plan's administration are continuous, while others must be performed annually. The 401(k) Plan must always comply with applicable regulations. The plan document must be current and a Summary Plan Description must be provided to participants. Any change in employer status (i.e. the purchase of another company) must be analyzed to determine its effect on the plan. Participants must receive enrollment materials, including beneficiary designation forms, when entering the 401(k) Plan.

   Contributions must be consistent with employee data and the plan document. It is important to make sure that all tests are properly assigned since failure to perform even one may result in severe penalties or plan disqualification. Extreme care should be used with "bundled" service providers because they may not possess the necessary skills to perform these tests. Since the testing requirements are the most complex and costly aspects of 401(k) administration, caution should be taken in this regard. If the 401(k) is properly designed, it may be possible to simplify the tests, or even eliminate some completely.

   The employer must meet certain reporting and disclosure requirements regarding ERISA (Employee Retirement Income Security Act of 1974-the basic law covering company qualified retirement plans) and plan participants. All participants should receive annually, a Summary Annual Report reflecting the financial status of the plan and participant statements reflecting their account balances. The Internal Revenue Service must be provided with the series 5500 forms for the plan annually. In addition to the annual requirements, participants must have the right to view other documents, such as the plan itself.

   The PrimePay Answer:

   The good news is that PrimePay completely eliminates the reporting, administration and management of your 401(k) Plan. Since we already have the employee information other 401(k) providers need, PrimePay can have all plan contributions invested every pay period without the employer having to prepare the time consuming paperwork. How easy it that?

6. Will You Help With My Plan Design?

   Land Mines to Watch Out for:

   Just because a financial advisor is licensed to sell investments offered in a 401(k) doesn't mean they are qualified to recommend a plan design. The compliance issues surrounding 401(k)'s are complex and require the advice of experts who only work with Retirement Plans. Many times, we come across 401(k) Plans that are completely inappropriate for a company.

   The PrimePay Answer:

   Each 401(k) expert at PrimePay has an average of 13 years experience. PrimePay will not only consult business owners with plan design, but we'll also offer investment advice to their employees. The same person who helped set-up your plan will be your point of contact for the life of your plan. The other payroll companies can't say that.

7. Do You Offer a Website So Plan Sponsors and Participants Can View Account Activity and Manage it Online?

   Land Mines to Watch Out for:

   Any Retirement Plan worth mentioning should have the capability of viewing daily account activity online. If you're looking at a plan that doesn't, then keep looking. You really need to offer this feature to your employees to comply with some of the standards outlined by the Department of Labor.

   The PrimePay Answer:

   PrimePay can offer you and your employees' on-line viewing of your 401(k) Plan-including daily activity. Plan sponsors have their own access code to view their plan level information. And participants have access to their accounts on a daily basis via the internet or by simply dialing a toll-free number.