401(k) Plans
The plan you already have, reviewed properly
Most of the 401(k) plans MTP Private Wealth at Farther reviews were set up competently and then left alone for a decade. That is where the exposure comes from.
In short
A 401(k) advisor selects and monitors the plan’s investment menu, benchmarks its fees, documents fiduciary decisions, and advises on plan design. Serving as a 3(21) co-fiduciary or a 3(38) investment manager, the advisor takes on part of the legal responsibility that otherwise sits entirely with the employer.
First question
Has anyone put fiduciary status in writing?
Many advisors serve 401(k) plans without ever accepting fiduciary status. They run enrollment meetings, answer participant questions, and suggest changes to the fund lineup, none of which requires acknowledging the role. That leaves the entire investment fiduciary duty with your company.
So before comparing advisors, ask your current one to state their status in writing and cite the section. A firm serving as a 3(21) or a 3(38) will produce the agreement language without hesitating.
We serve in either capacity and tell sponsors plainly which one we think fits. A company with an engaged finance team that wants a voice in the menu is a reasonable 3(21) client. A company where the plan is one of forty things on the HR director’s desk is usually better served by 3(38).
What we take on
The recurring work, off your desk
- Serve as 3(21) co-fiduciary or 3(38) investment manager, stated in the agreement.
- Build and maintain the investment policy statement.
- Run scheduled investment reviews and produce the committee minutes.
- Benchmark all-in fees and run a competitive process when the plan has outgrown its pricing.
- Sit in committee meetings and put the decisions on paper.
- Handle enrollment and education meetings for employees.
- Manage the recordkeeper and third-party administrator so you are not the go-between.
Fees
The five places 401(k) cost hides
Most sponsors can quote what the recordkeeper bills the company. That is often a minority of what the plan costs, because the rest comes out of participant accounts.
- Recordkeeping and administration
- Sometimes billed to the company, sometimes deducted from participant accounts, often both. This is usually the only figure a sponsor can quote from memory.
- Investment expense ratios
- Charged inside each fund and paid by participants. Never appears on an invoice, and frequently the largest single layer of cost in the plan.
- Revenue sharing
- A fund returning part of its expense ratio to the recordkeeper to offset plan costs. Makes a plan look cheaper than it is, and can create a reason to favor funds that share revenue.
- Advisory fees
- What the plan pays its advisor, if the arrangement is disclosed as a plan expense rather than bundled invisibly into another layer.
- Transaction charges
- Per-event fees for loans, distributions, hardship withdrawals, and QDROs. Small individually, and worth knowing about before a participant is surprised by one.
Add all of it, divide by plan assets, and you have the number worth benchmarking. Sponsors are routinely surprised by it, and a competitive process frequently gets the incumbent to match a better quote without the plan moving anywhere.
Plan design
The levers most sponsors never pull
Plan design is set once at adoption and rarely revisited, even when headcount, profit, and goals have all changed since.
Safe harbor design
A required employer contribution in exchange for automatically passing certain nondiscrimination tests. Useful when highly compensated employees keep getting refunds because participation among everyone else is low.
Automatic enrollment
Enrolling employees by default and letting them opt out. The single most reliable lever on participation, and it moves the needle on testing outcomes at the same time.
Profit sharing
A discretionary employer contribution on top of matching, allocated by a formula. Where an owner puts away meaningfully more without committing to it every year.
Roth deferrals
Letting participants contribute after tax. Costs the employer nothing, matters a great deal to younger employees and to anyone expecting higher rates later.
Vesting schedule
How long before employer contributions belong to the employee. A retention tool that also changes plan cost in an industry with high turnover.
Eligibility rules
Who gets in and when. Tightening eligibility for short-tenure staff reduces cost and administrative churn, within the limits the rules allow.
Common questions
401(k) questions we get most
Selects and monitors the plan's investment menu, benchmarks fees against comparable plans, documents the committee's decisions, advises on plan design, and handles employee education. An advisor serving as a fiduciary also accepts legal responsibility for the investment decisions, in the role stated in your service agreement.
Add every layer of cost, including fund expense ratios and revenue sharing, divide by plan assets to get an all-in figure, and compare that against plans of similar size and complexity. ERISA requires fees to be reasonable for the services received, not lowest, and the comparison has to be documented.
No. We consult on plans at Vanguard, Fidelity, and the newer low-cost recordkeepers, with no ownership or revenue relationship with any of them. If a competitive process shows your incumbent is priced fairly, staying put is a perfectly good outcome.
A 3(21) advisor recommends investments and your committee decides, so your company keeps fiduciary responsibility for the decision. A 3(38) manager makes the decision and accepts liability for it, leaving you with the narrower duty of prudently monitoring the manager you appointed.
Automatic enrollment, more than anything else. Education alone tends to produce a short-lived bump. Enrolling employees by default with a sensible deferral rate and an escalation feature changes participation durably, and it usually improves your testing results too.
Investments quarterly or semiannually, with documented minutes. Fees formally every few years, and sooner if assets or headcount have grown a lot, because pricing tiers are asset-based and a plan that has doubled may qualify for terms nobody has asked for.
Next step
Start with what the plan actually costs
Send us your current statements and fee disclosure. You get an all-in cost figure and a benchmark against comparable plans, and a clear read on where the documentation is thin.