There is an old saying that the customer is always right.<\/p>\n
When it comes to a retirement plan, the owner isn\u2019t always right.<\/p>\n
I\u2019ve dealt with enough plan sponsors over the years to know that business owners are used to getting their way. It\u2019s their company. They built it, they own it, and they\u2019re usually the person making the final decision.<\/p>\n
A 401(k) plan doesn\u2019t work that way.<\/p>\n
You can\u2019t simply decide that you want to give yourself a contribution and not give one to employees if the plan document and applicable rules don\u2019t permit it. You can\u2019t let a favored employee into the plan early because they\u2019re doing a great job. You can\u2019t approve a distribution because somebody really needs the money if the plan doesn\u2019t permit the distribution.<\/p>\n
You also can\u2019t ignore the plan document because doing something differently seems easier.<\/p>\n
The rules don\u2019t care that you own the company.<\/p>\n
This is where good plan providers earn their money.<\/p>\n
Sometimes the most valuable thing a TPA, advisor, recordkeeper, or ERISA attorney can tell a plan sponsor is \u201cno.\u201d<\/p>\n
Nobody likes hearing it. I\u2019ve certainly had clients who didn\u2019t appreciate the answer. But I\u2019d rather have an unhappy client for five minutes than a client with a compliance problem that takes months and thousands of dollars to correct.<\/p>\n
The worst providers are sometimes the ones who always say yes. They want to keep the client happy, avoid an uncomfortable conversation, or simply don\u2019t want to challenge the owner.<\/p>\n
That\u2019s not service.<\/p>\n
Good providers explain why something can\u2019t be done and, when possible, offer a compliant alternative that accomplishes what the sponsor is trying to achieve.<\/p>\n
Owning the company gives you plenty of authority.<\/p>\n
It doesn\u2019t give you the authority to ignore ERISA, the Internal Revenue Code, or your own plan document.<\/p>\n
Sometimes the owner simply isn\u2019t right.<\/p>\n
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