7 of the most common mistakes when setting up a retirement plan

Don't make one or more of the 7 most common mistakes when setting up a retirement plan for your company. They are easily avoidable if you know what they are.

1.      Being price-focused versus fee conscious:

  • Understand service-driven versus investment-driven fees;common mistakes when setting up a retirement plan
  • Research BACK-end chargers for terminating services;
  • NOTHING IS FREE, so be aware that you ARE paying for services rendered (in the form of set up fees, asset-based fees, surrender charges, or contract termination fees);
  • Competitive fees (not necessarily the lowest) and excellent service trump service providers selling based on the lowest fees as the service they provide is often minimal at best.

2.      Going it alone:

  • Partner with the experts, they will tell you what questions to ask and find the best fit for you!
  • Surround yourself with an experienced TPA (third party administrator), CPA (certified public accountant), and financial advisor.  Ask them the questions you should be asking your other service providers.  These providers are independent from each other, but strategically partner together for your success.

3.      Selecting a service provider simply because they provide support in other areas of your business:Get the Ultimate Retirement  Plan Toolkit!  (4 white papers included!)

  • Just because a company is an well-known payroll provider does not make them an expert in retirement plans;

4.      Not timing it right:

  • Understand critical deadlines when putting a plan in place in order to best maximize the contributions you and your employees may make to the plan.

5.      Delaying the decision to establish a retirement plan because there are so many plan design choices:

  • Do it now, start off simple & let your experienced partners (TPA, CPA, investment advisor) help you move forward;
  • Don’t miss out on potentially business & personal-altering tax incentives because you are afraid of starting the process;
  • When you set up your plan, choose the basic options that facilitate the ease of plan administration.  Don’t over-burden yourself with difficult plan design features that may make your day-to-day administration of the plan a burden;
  • As your plan grows, your service providers will present options for your consideration to help you maximize the benefit of the plan, while making administration as seamless as possible;
  • Ask your potential service provider if they continually evaluate plan design options for you (no more than once a year)?  Your business grows and changes, employees come and go; therefore, your plan will change too.

6.      Going with a TPA that asks YOU the questions they should already know!:New Call-to-Action

  • At the end of each year, you will provide your TPA with census data.  This includes compensation, hours worked, hire date, termination date, etc.;
  • If a TPA asks you if you are a Key Employee, an HCE, a member of a controlled group, and they have your census data for current and prior years (as well as ownership history), why are they asking YOU to figure out if you are an HCE, Key or controlled group.  Find a provider that will scrub the data you provide and ask clarifying questions, since THEY are the experts.

7.      Forgetting that time is money:

The time you spend on the phone with a service provider is eating up time you can spend working on your business or personal time that is priceless.

  • Ask yourself, “If I choose the low-cost, service-challenged company to administer my retirement plan, how much time am I spending on each phone call with them?” (working through the phone tree that keeps asking you clarifying questions until you hang up in frustration and try again);
  • “If I call my current service provider, do I have a single point of contact I can email or call at anytime?”  Do you have an experienced representative that can answer your questions and service your plan?  How many times do you have to repeat your inquiry/request before you get the answer?

When setting up a retirement plan, you need to be surrounded by service providers who will set you up for success and proactively search for solutions for your pain points. Check below for some free offers that will help you in the process.

If you want to avoid these mistakes and get the most out of your retirement plan, check out The Complete Guide to Choosing, Setting Up & Maintaining A Company Retirement Plan

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You might also like:

The Dangers of a DIY Retirement Plan

Retirement Plan Administration - The BRI Experience

How to get a retirement plan set up


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