Understanding Your 401(k)

I love my partners. I love my partners because they have a commitment to helping our mutual customers. A commitment that goes far beyond selling dental supplies. Throughout the last nine years at Schein, I have cultivated many relationships with other dental professionals who love dentists just as much as I do. I recently connected with Jacob Tolley, with Copperleaf Capital, who educated me on 401(k) plans, and how he can help establish plans for you and your team.

“My connection to the dental community is both personal and professional. Growing up my uncle owned his own dental practice and my aunt was a dental hygienist. My cousin followed in his Dad’s footsteps and took over his practice in Virginia. Even more close to home, my sister is a practicing dentist with a specialization in prosthodontics in Columbus, Ohio. She went to dental school at West Virginia University (hopefully there a few Mountaineers reading this!) and through those relationships I have many friends that are doing dentistry in some form or fashion.

As for me, I quickly knew dentistry was not my thing when I saw the amount of chemistry and biology course work my sister was required to do. No way – no thanks. I opted for the business side of dentistry and that is now my professional connection to the industry. In 2010 I relocated to Raleigh with the goal of finding a niche of business owners and employees that I was socially involved in and could partner with and dentistry was my spring board. My specialization and expertise is now managing 401(k) plans at a fiduciary level for dental practices.”

So what does it mean to specialize in retirement plans? Well when it comes to 401(k) plans, you can get one from just about anywhere. From payroll & insurance companies, to banks, fund managers, and of course investment firms, there is not limit or regulation as to where a business owner can get a 401(k) plan. Scary if you really think about it considering 401(k) are the most commonly used retirement savings vehicle used in America.

Typically, when it comes to a 401(k) plan, a recommendation comes from a CPA, another dentist, study group, family member, friend, peer, etc. Just like in dentistry, the 401(k) world has both generalists and specialists. Most “advisors” who do 401(k) plans may have 1-2, a few may have 5-10. Jacob currently manages close to 60 which I believe speaks to his dedication to the retirement plan space.

Unfortunately for the business owner and their employees alike, when a 401(k) is sold, managed, and monitored by someone who is not an expert, there is a distinct difference between having a 401(k) plan in your practice and truly offering a best in class retirement plan that operates efficiently and does what it is designed to do – serve as an employee benefit for you and your employees.

Too many times corporate retirement plans suffer from a lack of transparency as it pertains to fees and do not provide the business owner or the employees the tools, education, and advice they need to feel confident about the decisions they are making. These are for profit companies that manufacture products with the primary purpose of making money. Now, don’t get me wrong, Jacob owns and operates a for-profit company as well, but his commitment to his clients it to manage their plan at the highest level of trust and care – a fiduciary level – just as you do with your patients.
Below are a few tips to consider when it comes to your 401(k):

– All 401(k) plans have fees. As a business owner do you know who your plan service providers are, what they cost, and do you have a documented process that shows the fees are “reasonable”? This is not a best practice. These are the fiduciary guidelines of ERISA, enforced by the Department of Labor. Most business owners do not know what or who a 401(k) service provider is – let along what they cost. Let me help provide you with that education.

– Fees in a retirement plan are most commonly pulled from plan assets. What this means is the service providers and fund companies deduct their fees from the plan without you or your employees seeing it. You aren’t writing a check for these fees so how can you be sure what you are paying?

– If you own your dental practice and have the majority of the assets in the plan, why pay plan fees out of the assets? Asset-based fees erode investment returns. There are ways to design the plan so that not only are fees reduced, but fees can be invoiced to the practice as a tax-deductible expense. If you have the bulk of the plan assets, this could certainly make sense.

– Who is currently taking on the fiduciary responsibility for monitoring the investments being offered to your employees? Truth is most “advisors” do not or cannot serve in a fiduciary capacity which means that responsibility falls on the shoulders of the business owner.

– Lastly, what about your employees? Is the 401(k) plan being offered to them low cost, transparent, and serving in their best interest? Is anyone meeting with them to offer education and advice? Money and behavior are very closely related and time and time again I see employees who do not save money simply because nobody has every explained anything 401(k) related to them in a simple, easy to understand manner. Our country has a savings epidemic and my goal is to work with each participant one on one to help change those habits.

If you have questions about your 401(k) plan or just want to learn more about the moving parts and want they cost, Jacob Tolley with Copperleaf Capital is happy to do so on behalf of our relationship with no obligation. Jacob in the education business as much as the retirement planning business and believe doing what’s best for people starts with honesty and transparency.

Jacob may be reached at: jtolley@copperleafcapital.com

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