401(k) Plans don’t have to be a period, they can be a comma

Too often brokers and financial advisors think about their client’s retirement plan needs and only think about the 401(k) plan. It’s understandable based on their lack of understanding of retirement plan basics, but it’s not when there is a vast selection of retirement plan consultants and ERISA attorneys who can help advise the client and the financial advisor.

A 401(k) plan is an attractive savings vehicle for plan participants and if done correctly a great employee benefit. However, there are a few plan designs such as new comparability and safe harbor design that can help augment the retirement savings of highly compensated employees. Also, other plans can be added to a 401(k) plan that can certainly add a lot more firepower to retirement savings like a cash balance plan, a defined benefit plan, or in many cases, a non-qualified deferred compensation plan.

Too often, plan advisors just don’t look beyond the 401(k) plan. This is more so when the advisor is using a bundled or payroll provider as the plan’s third-party administration (TPA) firm. Bundled or payroll provider TPA tends to be more mechanized about retirement plans, so I find they are the last ones who will try new plan designs or bring the option of adding another plan. Unbundled TPAs tend not to be boxed into the 401(k) plans, so I find that they think outside of the box more often.

401(k) plans are great plans if done correctly, but there is no reason that a plan sponsor should stop there if their pocketbooks can afford more.

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