The Frugal Fiduciary Blog

New Comparability 401(k) Plans - Are They Right for Your Small Business?

Posted by Eric Droblyen on Apr 19, 2017

One of the most common goals for a small business 401(k) plan is maximizing owner contributions up to the legal limit - $60,000 for 2017 (assuming employee catch-up contributions). Often, the cheapest way to meet this goal is using a new comparability profit sharing contribution. Unlike other types of 401(k) profit sharing, these contributions permit an employer to allocate multiple contribution rates to different employee groups – making larger contribution rates to business owners possible.

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Fee Study of 525 401(k) Financial Advisors – Why Trump Can’t Reverse Tide of Fiduciary Advice

Posted by Eric Droblyen on Apr 5, 2017

This week, the DOL delayed the effective date of its Fiduciary Rule – which would define all retirement plan financial advisors as ERISA fiduciaries, effectively banning conflicted 401(k) investment advice that puts advisor profit ahead of client interests – by 60 days from April 10, 2017 to June 9, 2017.  The delay was triggered by a memorandum from President Trump that directed the agency to complete a new analysis of the rule’s likely economic impact.

As a critic of the Fiduciary Rule, it’s a good bet that President Trump ordered the DOL analysis to build a case for overturning it. If that happens, it would be a huge (yuge?) victory win for brokers and insurance agents – who are currently non-fiduciaries. According to a study from the White House Council of Economic Advisers (CEA), these advisors rake in more than $17 billion in excess fees annually due to conflicted advice.

If you are a supporter of the Fiduciary Rule like me, it can be easy to be upset by the Trump administration delay. However, I’m not worried about it. Even if this ban on conflicted retirement plan advice is squashed, I am confident the die is cast. Following several high-profile excessive fee lawsuits, more 401(k) plan sponsors than ever are hiring fiduciary-grade financial advisors to lower their liability. The kicker? Their impartial advice is often cheaper than potentially-conflicted, non-fiduciary advice. And I have the numbers to prove it!

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Topics: Fiduciary Responsibiilty, 401k fees, DOL Fiduciary Rule, Provider Shopping, 401k Studies, Financial Advice

The Top 4 Lies Told by 401(k) Providers

Posted by Eric Droblyen on Mar 22, 2017

After the death of his beloved mother, Harry Houdini was desperate to contact her from beyond the grave with the help of psychic mediums – who claimed an ability to communicate with the dead. Mediums were very popular at the time, but it didn’t take long for Harry to discover they couldn’t do what they promised. Upset, Harry became determined to expose their lies to protect unwitting customers.

Like mediums, some 401(k) providers make false claims. Their lies can easily go unnoticed to 401(k) fiduciaries due to the highly-technical nature of 401(k) services. However, believing these lies – and hiring the provider that makes them – can trigger severe consequences. They often mask excessive 401(k) fees or a lack of expertise that can increase fiduciary liability.

If you’re a 401(k) fiduciary, identifying 401(k) provider lies is imperative to mitigating your plan liability. The good news? Most are easily debunked with some basic facts.

I’d like to channel (pun intended) Harry Houdini by exposing four of the most common lies told by 401(k) providers today.

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Topics: Revenue Sharing, Fiduciary Responsibiilty, 401k fees, Provider Shopping, Plan Setup

401(k) Fees – Frequently Asked Questions by Plan Fiduciaries

Posted by Eric Droblyen on Mar 8, 2017

Small businesses that sponsor a 401k plan have a fiduciary responsibility to only pay necessary and reasonable fees from plan assets. Keeping 401k plan fees in check is one of the most important fiduciary responsibilities because excessive fees reduce investment returns unnecessarily, making a comfortable retirement for plan participants less affordable. Not meeting this responsibility can also mean severe consequences for plan fiduciaries – including personal liability.

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Topics: 401k fees, Provider Shopping

401(k) Index Funds – They Make it Easy to Reduce Fiduciary Liability

Posted by Eric Droblyen on Feb 22, 2017

Investment in equity index funds – and other passively-managed investments designed to track a market index – is exploding. According to a Morningstar study, these investments took in a record $504.8 billion in 2016. That’s in contrast to actively-managed funds, which are designed to outperform an index. These funds experienced outflows of $340.1 billion in 2016.

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Topics: Investments, Financial Advice

Finding Hidden 401(k) Fees in Participant Disclosure Notices

Posted by Eric Droblyen on Feb 8, 2017

In a 2015 study of 4,368 retirement plan participants, the National Association of Retirement Plan Participants (NARPP) found that 89% could not correctly calculate their account fees.  Even more disturbing, only 42% knew they were paying fees at all.  Most plan participants – 58% - were unaware that fees were being “automatically” deducted from their account.

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Topics: Revenue Sharing, 401k fees

Roth 401k Deferrals — Answers to Common Questions

Posted by Eric Droblyen on Jan 25, 2017

In a 2016 401k plan design study of 2,767 small businesses, we found 66% permit participants to make after-tax Roth deferrals to their personal account. I think it’s safe to assume the high adoption rate of this 401k plan feature is due to participant demand.

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Topics: Roth 401k, Retirement Planning, Plan Design

4 Traits of the Best Small Business 401k Providers

Posted by Eric Droblyen on Jan 11, 2017

There are thousands of 401k providers in the U.S. – many with very different fees, services and expertise. This abundance of choice can make choosing a competent 401k provider with reasonable fees seem overwhelming for small business 401k fiduciaries.

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Topics: Provider Shopping

Our Top 10 401k Blogs of 2016: What Topics Were the Most Popular?

Posted by Eric Droblyen on Dec 28, 2016

Happy Holidays from the Frugal Fiduciary! As 2016 comes to a close, we looked back through this year’s blogs to find the most read.  It turns out our most popular blogs related to the following topics:

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Topics: Retirement Plan Types, Fiduciary Responsibiilty, Safe Harbor 401k, 401k fees, Plan Design, 401k Studies

401k Eligibility: When to Let Employees Join Your 401k Plan

Posted by Eric Droblyen on Dec 14, 2016

During the 401k plan design process, we get a lot of questions from small business 401k fiduciaries about employee eligibility.  They want to know when they should let new employees into their 401k plan and their options for keeping certain employees – generally the ones that won’t participate – out.

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Topics: Plan Design, 401k Studies

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