{"id":3722,"date":"2018-10-12T07:16:36","date_gmt":"2018-10-12T11:16:36","guid":{"rendered":"http:\/\/therosenbaumlawfirm.com\/blog\/?p=3722"},"modified":"2018-10-12T07:16:36","modified_gmt":"2018-10-12T11:16:36","slug":"the-problem-of-the-inefficient-plan-design","status":"publish","type":"post","link":"https:\/\/therosenbaumlawfirm.com\/blog\/?p=3722","title":{"rendered":"The Problem of the inefficient plan design"},"content":{"rendered":"<p class=\"s4\"><span class=\"s2\"><span class=\"bumpedFont15\">When you start fixing up the house (for me, a never-ending battle) and replacing appliances or items like the front door or the roof (I think I\u2019ve replaced 4 front doors in 13 years), you realize that the replacements are more energy efficient. Replacing that old refrigerator or that washing machine can lead to some savings in your energy bills.<\/span><\/span><a name=\"_GoBack\"><\/a><\/p>\n<p class=\"s4\"><span class=\"s2\"><span class=\"bumpedFont15\">When it comes to retirement plans, there are so many of them that are inefficient in either <\/span><\/span><span class=\"s2\"><span class=\"bumpedFont15\">their<\/span><\/span><span class=\"s2\"><span class=\"bumpedFont15\"> cost structure or plan design. While cost structure will be all disclosed to plan sponsors (who have the duty as fiduciaries to determine their reasonableness), plan design inefficiency is something that won\u2019t be discovered until the plan goes through an independent review (like my Retirement Plan Tune-Up) or takes the plan to another third party administrator (TPA). Inefficient plan designs come in all sorts, but it wastes money like that 40-year-old furnace I replaced 13 years ago.<\/span><\/span><\/p>\n<p class=\"s4\"><span class=\"s2\"><span class=\"bumpedFont15\">Inefficient plan design wastes money because it either makes less cost-effective contributions or it doesn\u2019t maximize tax-deductible contributions to highly compensated employees. So it either wastes money in unnecessary contributions or is inefficient for tax savings.<\/span><\/span><\/p>\n<p class=\"s4\"><span class=\"s2\"><span class=\"bumpedFont15\">In terms of wasting money, it could be a defined benefit plan that has outlived its usefulness or it could be a 401(k) plan with a new comparability plan design and a safe harbor matching contribution (because unlike a safe harbor 3% profit sharing contribution, you cannot use the safe harbor matching to offset any new comparability contributions to non-highly compensated employees like you could with the safe harbor 3% profit sharing contribution). A plan that doesn\u2019t maximize contributions could be a 401(k) plan that consistently fails discrimination testing and doesn\u2019t implement a safe harbor plan design or a plan that doesn\u2019t offer a new comparability profit sharing allocation to highly compensated employees when the plan sponsor can afford it.<\/span><\/span><\/p>\n<p class=\"s4\"><span class=\"s2\"><span class=\"bumpedFont15\">Retirement plans are a great employee benefit for retirement savings, but you should never forget the tax savings component it has.<\/span><\/span><\/p>\n<p class=\"s4\"><span class=\"s2\"><span class=\"bumpedFont15\">So when I consistently state the claim that plan sponsors need to find a quality TPA that is not predicated on price but predicated on its competency and knowledge of cost-effective, retirement plan design.<\/span><\/span><\/p>\n<p class=\"s4\"><span class=\"s2\"><span class=\"bumpedFont15\">When you look for new appliances, you always look for those with an Energy Star sticker. When shopping for TPAs, look for those who would deserve a Tax Star sticker (if one existed, don\u2019t steal my idea!).<\/span><\/span><\/p>\n<p><span class='st_sharethis' st_title='{title}' st_url='{url}' displayText='ShareThis'><\/span><\/p>","protected":false},"excerpt":{"rendered":"<p>When you start fixing up the house (for me, a never-ending battle) and replacing appliances or items like the front door or the roof (I think I\u2019ve replaced 4 front doors in 13 years), you realize that the replacements are &hellip; <a href=\"https:\/\/therosenbaumlawfirm.com\/blog\/?p=3722\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n<p><span class='st_sharethis' st_title='{title}' st_url='{url}' displayText='ShareThis'><\/span><\/p>","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/3722"}],"collection":[{"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3722"}],"version-history":[{"count":1,"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/3722\/revisions"}],"predecessor-version":[{"id":3723,"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=\/wp\/v2\/posts\/3722\/revisions\/3723"}],"wp:attachment":[{"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3722"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3722"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/therosenbaumlawfirm.com\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3722"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}