What's also changed the 401(k) game, says Kaye, is the U.S. Supreme Court's 2008 decision allowing employees to sue over the mismanagement of 401(k) retirement accounts. Most lawsuits have focused on fees and processes, not performance, he says. He expects this will continue to motivate plan sponsors to seek additional support.
Kaye, who has built his 401(k) practice through word of mouth and professional referrals, has developed a specialty in the medical field and aviation. One client, Swiss International Air Lines Ltd., was recently named a 2011 Plan Sponsor of the Year finalist by Plan Sponsor magazine.
AEPG doesn't just manage investments for clients. It also develops strategic and business plans, writes mission statements and investment policy statements, runs committee agenda meetings and keeps minutes at these meetings. The firm also sets education policy statements and makes sure the education isn't above plan participants' heads. Kaye notes that many plan sponsors would fail Labor Department audits because they don't have written investment policy statements and committee meeting agendas or notes.
Think larger businesses are savvier about 401(k) planning? "They're just as much a mess as small plans," says Kaye, whose firm discovered that one 1,200-employee outfit it started to do work for hadn't conducted employee education in ten years or implemented fund changes in more than five years.
The TRC Group at Morgan Stanley Smith Barney in Rancho Bernardo, Calif., also helps companies manage their 401(k) plans, an effort that accounts for about 75% of its business, focused mainly in San Diego County.
"In this time of turmoil and volatility, employers need help and hand-holding to stay focused on the future," says Tom Kokjohn, one of four financial advisors on the TRC team. His group began focusing on 401(k) plan management eight years ago while they worked together at another firm. Morgan Stanley hired them in 2009 to help grow its corporate retirement plan practice. Form 5500 filings were a good resource when the team initially developed its business through cold calling, says Kokjohn.
It now works with a wide range of 401(k) providers.
The TRC Group takes clients through a profiling questionnaire to help find them their best options. It assesses priorities regarding technology, systems integration, administration, investment flexibility, communication services and fees.
How frequently TRC meets with plan participants varies on the size of a company, its number of locations and Internal Revenue Service testing issues. The IRS requires deferral and contribution percentage tests to prevent 401(k) plan discrimination in favor of highly compensated employees. The group has been trying to ramp up its education efforts to increase employee 401(k) participation and, in turn, enable executives to more fully participate. Automatic enrollment and escalation design features have helped, says Kokjohn.
Advisor Peggy McGillin, a principal with Journey Financial Planners in Concord, Mass., is only in the early stage of building a 401(k) practice, but she has already learned valuable lessons. "The trick is to really understand the motivation of a business owner without value judgment," she says.