"Terms & Conditions" handwritten with white chalk on a blackboar

Plan Design, Consultants, and Your Money

How much does it cost for a small to mid-sized plan sponsor to get good advice on plan design? Maybe the better question is how much should it cost to get good advice on plan design?  In my opinion, plan sponsors pay far too much for this type of guidance.  And this is money that could otherwise go to funding for their employees.

Plan design refers to, for the most part, how employers construct their plan to best meet their intentions and the needs of their workforce.  Design options include employee eligibility, access features like loans or withdrawals, vesting schedules, auto enrollment and escalation, rollovers, and other less visible plan components. Plan funding is also a feature of plan design.  

I have set-up, roughly, 40 to 45 plans for some very small employers – 1 to 2 employees – to employers with multiple thousands of employees.  In my experience, speaking with the correct representatives of the organization, this conversation would normally take maybe 1 hour or so. Really! In most cases we were able to reach a consensus on how the plan would be structured.  The next step in larger organizations was to share these ideas with the Board or Committee for final approval.  There may have been some brief follow-up work, but that would normally take care of it.  In smaller organizations, they were ready to move ahead. That was it!

I found these plan design discussions to be straightforward.  Plan sponsors tend to know what will work for their people and can decide how to structure their plan with relative ease.  In addition, an experienced advisor can help in framing how some plan design features may impact plan operations and employee satisfaction as well.  As such, they can provide useful guidance on the pros and cons of plan features.

Once in place, I experienced little reason for modifications.  Sure, changes were necessary from time to time, but these were infrequent.  And I typically had to bring these considerations to their attention!  

I encourage plan sponsors to understand that plan design guidance is not a mystical process involving several reports full of industry jargon, decades of research and several thousands of dollars. It can be accomplished quickly with a straightforward conversation and, this is key, minimal cost!  Be a good fiduciary for your plan - don’t waste money on unnecessary consulting fees that add limited value to your employees’ financial future.