Summit in the News

1Kevin Haskell, Vice President of Retirement Plan Services, provides perspective regarding the challenges facing small to mid-sized business in recent Fiduciary News article, Fact or Fiction: Are Small to Mid-Sized Businesses Reluctant to Start 401k Plans?

On why small to mid-sized companies are less likely to offer 401k plans…

Kevin Haskell, Vice President of Retirement Plan Services at Summit Financial Corporation, based in Burlington, Massachusetts, says, “Small companies, especially, are laser-focused on their business. Sustaining and (hopefully) growing it, servicing clients, responding to competitors, and managing personnel is a full time job. Establishing a retirement plan may be on the to-do list, but misperceptions of ‘it’s too complicated to setup’ or ‘it’d be too costly’ push this item further down the list. Also, there may be a healthy awareness of the potential liability associated with establishing a plan. With the stronger enforcement of ERISA rules, no longer is it acceptable to take a position of ‘well, I put a retirement plan in place, if employees want to use it fine. If not, that’s not my concern. I don’t have time to oversee.’”

On ways for small business owners to maximize savings…

 “A small, closely held business can have a plan designed to set aside on a tax favorable status a substantial amount of money for the benefit of the owner by providing reasonable contributions to employees,” says Haskell. “These plan designs can also be utilized in conjunction with a defined benefit plan so that even higher levels of benefits can be provided to owners with little or no additional contributions. With larger plans, you can’t provide this same level of contribution without having larger funding costs.”

On fiduciary liability and optimizing plan design…

 “Larger companies tend to have more resources, including more personnel dedicated to monitoring the organization’s retirement plan than smaller organizations,” says Haskell. “Larger companies tend to have an advisor that will oversee the plan and who will conduct routine due diligence meetings and provide employee education. Larger companies also tend to have investment committees that work with the Plan Sponsor to make sure all investments are prudent and all fees are reasonable based on the services being offered. Like health benefits, a robust retirement plan is an essential factor in a company’s ability to attract and maintain top talent. Smaller and mid-sized companies may not have the bandwidth or appetite to take on the fiduciary liability of overseeing a retirement plan even though they recognize the importance of having one. However, there are many plan design options that mitigate compliance risk, eliminate the chance of failing discrimination testing, and help produce better outcomes for participants. Plan record-keepers and qualified third-party administrators continue to streamline administrative processes, thus allowing plans to operate more efficiently.”

On potential impact of Government mandated retirement plans…

Haskell says, “The assertive push of legislatures to sanction state-run retirement plans may dissuade some small-to-mid employers to setup and sponsor their own plan. In effect, the thinking being, ‘why go to the trouble, when I can pass it off to the state?’ From the company’s standpoint, enrolling in a state-run plan that would eliminate any liability or fiduciary obligations they would otherwise incur by establishing an employer-sponsored plan would seem to make sense. However, from an employee’s point of view, there are more questions than answers: Where would money be invested and will I have suitable investment options? Will my contributions be comingled with other state funds? Why aren’t these state plans subject to the same ERISA laws that govern private employer plans?”

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