Institutional 401(k) Plan Solutions by the MAC
2011 YEAR-END BONUS:
We serve as a fee-only Investment 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. As an independent investment advisor, we provide open-architecture 401(k) retirement plan solutions that provide our clients numerous advantages both for the participant (employee) and the sponsor (employer). The following table outlines the significant advantages that our open-architecture platform offers versus a closed-architecture plan.
OPEN-ARCHITECTURE VS. CLOSED-ARCHITECTURE 401(k)PLANS
| Feature | Open-Architecture | Closed-Architecture |
| Investment Selectoin | 8000+ Mutual Funds (MF) | 15 - 50 Mutual Funds (MF) |
| Brokerage Account Option | Yes, Full Brokerage | Rarely*, Limited to MFs |
| Investment Management | Option to hire an Adviser | Self-directed Only |
| Fund Expenses | Low-cost Institutional Index MFs (10 bps) | High-cost Retail MFs |
| Alternative Investment Options | Yes | Rarely* |
| Safety | US Treasury Money Market Funds | Stable Value funds w/ default risk |
* By "Rarely", we mean that these features maybe added to Retail Brokerage plans but its not commonplace and they are typically an inferior solution to our Institutional Adviser Plans. For example, many retail plans offer a brokerage account optoin but limit the participants options to mutual funds that pay a 12b-1 fee. Our brokerage option allows for investments in stocks, bonds and Institutional Mutual Funds.
Advantages for the Sponser (Employer):
- Shared Fiduciary Liability: As the investment adviser, we share the fiduciary liability with the company owners for the 401k plan at no additional expense. As fee-only adviser's, we are held to a higher level of responsibility than a traditional broker.
- Transparency: the fees on our 401k plans is completely transparent and in compliance with the new DOL regulations going into effect on 12/31/2011. Furthermore, our fees will invariably be lower than a retail brokerage 401k plan.
- TPA selection: We have researched hundreds of TPAs and have found the best options for our clients based on plan size and the needs of our clients.
- Superior Employee Benefit: Our 401(k) solution is means of providing your employees with a benefit that will stand above its peers while saving the company out-of-pocket expenses.
Additional Information on our 401(k) Solutions:
MAC White Paper - 16 Questions everyone Should be Asking thier 401(k) Provider
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
New Comparability Plans / Benefit based Profit Sharing
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.
