401(k) Plans
We serve as an Advisor on 401(k) plans, also known as Defined Contribution Plans, through a variety of brokers including Fidelity Investments, America’s largest 401(k) provider. We are very passionate about the 401k marketplace because we feel that 401(k)’s are one of the most effective means of funding a secure retirement for America's middle class, however, they are often loaded down with unnecessary expenses and offer poor investment options. As an independent, fee-only investment advisor, we provide open-architecture 401(k) retirement plan solutions that minimize many of the excessive costs of offering a qualified retirement plan to your employees, while providing best of breed investment options to plan participants. This webpage is divided into three Sections:
Section I: 401(k) Performance Report
Section II: 401(k) Solutions provided by The MAC
Section III: MAC White Paper - 16 Questions everyone Should be Asking thier 401(k) Provider
SECTION I: 401(k) PERFORMANCE REPORT
The following is our model portfolio’s performance on a Year-to-Date basis as of 9/30/09. If you are a participant in one of our plans and did not elect to participate in our model portfolio, please consult your statements or your TPA’s website for individual fund performance.
| Year | MAC Port | VINIX* | FDIVX* |
| 2007 | 14.5% | 5.5% | 16.0% |
| 2008 | (1.1%) | (37.0%) | (45.2%) |
| YTD** | 12.5% | 19.4% | 27.6% |
* VINIX is the Vanguard Institutional Index Fund and FDIVX is the Fidelity Diversified International Fund. These two funds are the two largest holdings in 401(k) plans by assets under management.
**As of 9/30/09
401(k) Performance Reporting Disclosure Statements
Portfolio returns are gross returns and do not reflect any non-fund expenses including but not limited to TPA fees, brokerage commissions and Adviser fees. These fees will be in the range of 1-2% annually. A participant’s realized return will be the reported return less these fees. Please check your company’s Adviser Agreement for fee schedule. Furthermore, actual realized returns will vary depending on money flows in and out of the master account. For additional disclosures regarding our performance reporting, please visit our Disclaimer, Performance Reporting Disclosure and Copyright Statements .
Total Portfolio Returns are calculated by multiplying the price returns (see next) of a particular fund or security by percentage of the portfolio allocated to the fund/security. For example, if a fund originally made up 25% of the portfolio and its YTD return is 10%, then it would contribute 2.5% to the total return of the portfolio.
Price Returns for individual positions are calculated by taking the difference in current price (P2) less the purchase price/previous year-end price, which ever is applicable, (P1) plus dividends paid (D) divided by the purchase/previous year-end price – (P2 + D – P1)/P1.
Compounding: From time to time, the adviser will change the allocation of the funds in the portfolio. In order to account for the compounding of YTD gains in the account, the following calculation will be made. The YTD gains for the portfolio plus a factor of one will be multiplied to the new current allocation. For example, assume that the portfolio is up 10% when an allocation change is made and 25% of the new allocation consists of Fund ABCDX. Any gains or losses for fund ABCDX will be multiplied by 27.5% to calculate the fund’s contribution to YTD gains.
SECTION II: 401(k) SOLUTIONS PROVIDED BY THE MAC
The MAC is Registered as an Investment Advisor with the State of Texas. Our primary office is in Dallas, TX and we provide 401(k) plans to clients throughout the State of Texas including Austin and Houston. The MAC acts an advisor to 401(k) Plans providing the following services to our 401(k) clients:
- Conduct a thorough needs assessment to determine what type of plan will best serve the client’s needs.
- Research and select a custodian for the plan’s assets
- Research and select a Third Party Administrator (TPA) to administer the plan. The TPA will perform all the necessary administrative duties related to executing a plan, such as daily valuation of participants accounts, executing trades, preparing the company’s 5500 tax form along with completing compliance testing requirements.
- Provide asset management for the plan including mutual fund selection. We use a combination of low-cost index funds (typically less than 17bps) and actively managed funds that we feel will provide participants with above average risk-adjusted returns.
- Offer an actively managed portfolio option for plan participants. The MAC’s 401(k) Portfolio is designed to reflect the same investment themes that direct our individually managed accounts. (Participants may choose between the MAC’s Portfolio or they may choose to self-direct their investment selection.)
- Conduct enrollment meetings and provide educational materials to improve participation rates.
- Serve in the official role of a 401(k) advisor to the company’s plan by signing a statement of fiduciary responsibility to the plan’s participants.
- Provide retirement planning services and personal money management advice to 401(k) participants.
To discuss your company’s 401(k) plan or to submit a request for proposa, please Contact Our Office.
401(k) Offerings
Open-Architecture 401(k) Plans
New Comparability Plans / Benefit based Profit Sharing
Open-architecture 401(k) Plans
Our 401(k) solution is provided on an open-architecture platform providing our clients and plan participants numerous advantages for their retirement dollars. The primary benefits to an open-architecture plan versus a closed plan are as follows:
Advantages for Participants
- Over 5000 mutual funds can be added to the plan
- Completely transparent fee structure
- Option of opening a brokeragelink account
- Actively managed 401(k) portfolio (see section 2 for historical returns)
- Lowest possible fund expenses (10bps for Fidelity Index Funds)
- Best of breed actively managed funds
- Availability of a United States Treasury Fund for asset protection
- Negative and zero beta funds for true diversification
Advantages for Plan Sponsors
- MAC signs on as a fiduciary of the plan
- Transparent fee structure assisting you in carrying out your fidicuary duty of communicating fees to plan participants
- In-depth research and selection of third party administrator for your plan
- Interactive investor education
- An employee benefit that will stand out compared to its peers
Yes, we do advise clients on Start-up 401(k) plans. Historically, small to medium sized companies (less than 500 employees) had very few options when initiating a retirement savings benefit for their employees. With the advent of open-architecture plans and low-cost administrative providers, options for smaller companies have improved dramatically. Our initial step will be to complete a needs assessment to determine which kind of plan is best suited to fit your company’s needs. During this process we’ll do a cost-benefit analysis and comparison.
The Safe-harbor provision was established to help small businesses implement 401(k) plans while keeping administration and testing requirements to a minimum. To qualify for the Safe-harbor exemption, a plan must meet certain pre-defined criteria. This criteria varies depending on the size of the plan but basically involves the employer making certain minimum matching requirements.
We do offer a Roth 401(k) option as part of our plans. While we feel that this option is beneficial in some scenarios, we do not recommend adding a Roth option to a plan unless there is a compelling reason to do so. The quick run-down on Roth 401(k)’s is this. Employee contributions are after-tax dollars and distributions are tax-free assuming all the necessary conditions are met. However, the Employer match and profit-sharing contributions are still pre-tax and all distributions will be taxed when they are paid to the beneficiary of the account. (Participants can defer taxes on distributions by transferring the assets directly into a Rollover IRA account.) There has been a lot of buzz surrounding the new Roth option on 401k’s but we are generally not in favor of adding this option unless there is a compelling reason to do so. We’ve found that adding additional options to a company’s plan only serves to confuse participants and results in lower participation rates. If you have a young workforce or several highly compensated individuals who are maxing out their contribution allowance, then a Roth option may be a good idea for your company.
Often times, a company will include a profit-sharing bonus or plan for its employees as part of their 401(k) retirement plan. This accomplishes two objectives. First, if provides employees a key incentive while allowing the owners to receive company profits on a pre-tax and tax-deferred basis. Second, contributions made to a pre-tax profit-sharing plan may improve the ratios for discrimination testing so business owners and highly compensated individuals can contribute more to their 401(k) accounts.
A few years back, the IRS approved a new method of testing profit-sharing contributions based on a benefits basis rather than on a dollar contribution basis. This new calculation method basically serves to combine the benefits of an age-weighted defined benefit plan with the flexibility of a defined contribution plan. In specific instances, a New Comparability Profit Sharing plan allows business owners to make far larger contributions to their own qualified retirement accounts while providing only marginally higher contributions for their employees. Law Firms, Medical practices, CPA firms and Architecture firms are just some of the examples of companies that typically could benefit from this type of plan. We also provide defined benefit plans for small businesses which may allow for an even larger pre-tax contribution. You can learn more by clicking here.
An individual 401(k), which is sometimes referred to as a Solo 401(k), is a qualified retirement savings vehicle for self-employed persons without any employees other than a spouse. Often times, it is a toss up between whether a self-employed person should utilize a SEP-IRA or an Individual 401(k). The primary reason for implementing a solo 401(k) versus a SEP-IRA is that in some circumstances, a solo 401k will allow you to defer additional income. We offer a unique Individual 401k solution through Fidelity Investments. Our solution is unique because it utilizes a brokerage account allowing you to invest in individual equities, bonds, funds, ect. (Most Solo 401k’s are provided by a mutual fund family and only their funds are available. AIM funds is one of the fund families that offers a solo 401k.) And the best part about our solution is that Fidelity doesn’t charge anything to administer the plan. The only fee you’ll pay is our asset management fee which is based on a percentage of assets in the plan.
To discuss the various 401(k) solutions we provide or to make a request for proposal, please Contact Our Office. We work with 401(k) sponsers throughout Texas including Austin, Dallas and Houston.
