As the ink dries and you’re shaking hands with your new client, you’re ready to celebrate an important milestone in your advisory practice: your first big plan. But it’s important to be ready for some new challenges that come with this feather in your cap. Here’s how your work might differ with a large plan, and how you can prepare for the task ahead.
Size Matters
A 401(k) with more than 100 eligible participants is generally considered a large plan. If your plan meets that threshold but you previously filed a Schedule I as a small plan, then you’re not required to have an annual audit until your participant count exceeds 120, subject to the DOL 80-120 rule. Otherwise, a Schedule H is required, which must be accompanied by an audit report provided by an Independent Qualified Public Accountant. And while this poses an additional responsibility, it also presents an opportunity to catch compliance issues before they have a chance to snowball.
Fee structures are usually different for large plans. Providers typically charge lower per-participant fees because of the scale of a 401(k) with a larger asset base. This means you can often negotiate more competitively with providers — so get ready to sharpen those bargaining skills.
What About Managing Fees?
While excessive fee lawsuits have increasingly targeted small plans in recent years, one of the primary challenges of advising a large plan remains an increased risk of ERISA suits due to greater plan assets and the potential for more plaintiffs. But another is simply the time requirement to oversee the investments of 100+ participants. And if you’re offering financial wellness programming, webinars and educational services, it takes additional time and resources to meet a greater number of participants’ needs.
The Right Tools for the Job
To ensure plan fees remain reasonable, you’ll need robust and flexible benchmarking solutions. PlanFees’ innovative suite of tools can provide quick, meaningful insights and help meet fiduciary responsibilities.
- Prism Total Fees Benchmarking. Get a fast and accurate fee checkup to assess whether administrative, investment, recordkeeping and advisory fees are low, average or high compared to other large plans.
- Prism365. Larger plans often require an expanded advisory offering. Prism365 Advisor Fee & Services Benchmarking lets you home in on advisory fees, including the frequency of 15 essential fees, and even allows you to input custom services you offer.
- RFP Express. Stay ahead of the competition by providing actual quotes from top providers within 24 hours using RFP Express — giving you actionable data without the time commitment of a live bid.
A Large Plan Can Be a Steppingstone
Your first large plan is an important milestone in your advisory business, and it can help you land another. With PlanFees’ suite of benchmarking tools at your service, you can help ensure your first big plan isn’t your last.
Sources:
- https://www.claconnect.com/en/resources/articles/2022/when-do-you-need-a-401k-audit
- https://www.cnbc.com/2017/04/06/what-you-dont-know-about-401k-fees-can-cost-you-plenty.html
- https://401kspecialistmag.com/smaller-401k-plans-have-a-lot-more-problems-than-larger-plans
- https://anderscpa.com/401k-audit-120-magic-number/?tag=401kaudit
