Month: October 2013

End-of-year is always a busy time for business owners. While there are lots of items, initiatives and, no doubt, people competing for your time and attention, there is one item that simply can’t be ignored — 401(k) management and review.

On the management side of things, there are annual notices that you as a plan sponsor must issue to participants — many by Dec. 1. The three most common notices are the Section 401(k) Safe Harbor Notice, the Section 401(k) Automatic Enrollment Notice, and the Qualified Default Investment Notice. Failure to issue notices on time may result in IRS penalties (as well as unhappy employees).

Turning to the review side, end-of-year is the ideal time to conduct a benchmarking review of your plan. Essentially a competitive review of your plan’s pricing, features, benefits and value provided to the participants, benchmarking should be done at least every three years. It is costly and or time consuming, so annually is too frequent. A benchmarking review is great way to ensure existing participant plans have the same product options and pricing that new plan enrollees might receive. In addition, benchmarking can ensure the fees associated with your plan are reasonable and commensurate with the services you’re receiving.

There are a couple of ways to go about benchmarking your plan. One is to hire outside advisors to do the analysis. Another is to put the plan out to competitive bid. Each option has its own strengths and weakness but both are considered completely and equally acceptable and desirable routes to go.

It’s important to note that benchmarking isn’t just important to making sure your employees’ (as well as your own) retirements are on track; it’s essential to satisfying your fiduciary responsibility as plan sponsor. As a business owner and plan sponsor you act as a fiduciary. As such, you are held to the highest standard of the law. The Department of Labor looks to you and the vendors you have chosen to work with to make sure the plan you’re offering is competitive in all aspects. While the vendors you work with to provide your 401(k) plan will assist in the compliance and notices to participants, the ultimate responsibility for the plan design and review falls to you. No firm or no other entity can completely replace your fiduciary responsibility.

While benchmarking is not required by law the way annual notices are, it’s my opinion that you should consider it an equally important responsibility. It’s an extremely effective way to stay on top of the evolving needs of your employees, the services offered by your plan provider, and it can go a long way towards protecting you as the fiduciary and all the participants.

Autumn is once again upon us and everything is feeling right and comfortable. The kids are back in school, we’re slipping back into old routines, the fall weather has been spectacular, and, quite happily, the stock market is up. What could be bad?

Well, unfortunately, a wee bit further south of us some other folks are also falling into some familiar routines. Specifically, the federal government is once again making noise about debt ceilings and a federal shutdown. Just like last year, the threat of a shutdown has added to and will continue to increase market volatility over the short term.

Granted, volatility is part of any market, especially the stock market. Measured in a number of different ways, volatility in and of itself it isn’t a bad thing. In fact, it’s part of what leads to a higher return for certain asset classes. However, the increased ups and downs in daily and weekly stock prices tend to lead to investor uncertainty prompting some to make irrational — and often poor —investment decisions.

Which is why in times of uncertainty it pays to be certain.

That is, it pays to have an investment strategy in place ahead of time with defined entry and exit points on your investments. By committing in advance to a plan, you can essentially ignore the media frenzy and avoid making reactionary decisions. Instead, you can use this time to make some calculated choices.

For example, if you are an investor with a plan and some cash available, there’s a good chance that any near term pullback in prices will provide an excellent entry point at prices lower than today. If you’re more conservative and more interested in locking in the gains of the US market over the past year, you can look at tightening up your stop loss points.

Most importantly, if you get stopped out of your holdings — the term used to describe when an investment reaches its stop loss point and is sold — or you fear the volatility is the start of the next big decline, you can commit to a new plan; a plan in which you reinvest after certain metrics have been met so you don’t miss the inevitable next rally.

While nothing is ever certain when it comes to forecasting the market, having a pre-determined plan for how you’ll respond in good times and bad is one certain way to avoid making reactionary and reckless moves.

A few weeks ago, I received an email from a client requesting that I wire money to a Western Union office in London. The brief email stated that he had been mugged and now needed $1,500 to get back to the United States.

While my first response was a mix of panic and compassion, my second was suspicion. I had spoken to the client just a few weeks earlier and he hadn’t mentioned an international trip on the horizon. However, the email was from his standard account and the sender used my first name in the salutation. Added to that was the fact that it wasn’t an outrageous amount of money being requested. I had to consider that it might just be legit.

I replied to the email stating that I suspected his email was hacked and that I was not going to send the money without speaking with him first. Moments later a reply came back saying, indeed it was my client, he had been mugged and he really needed the money sent ASAP! I thought, wow, either this email hacker is really good or my client really is in trouble in London.

Not convinced one way or another, I picked up the phone and called my client’s home number. Sure enough, he picked up the phone. While he was safe and sound at home, his account had indeed been hacked. Not only was I grateful he was okay, we were both grateful I was cautious.

While the ease of instantaneous global fund transfers provides some significant convenience, it’s not without risk. The truth is, once the money leaves your account it is almost impossible to get back. Ninety-percent of the time, wire fraud involves email hacking.

Very simply, email hackers go through your address book and look for previous emails from financial services firms as well as grab your personal email address book. They then create personalized emails directly to individuals that, on the surface, appear very believable. So believable, in fact, that it’s estimated that nearly $300,000,000 (that’s million, folks) will be lost to wire fraud this year in the US alone.

Fortunately, there is an easy solution for protecting your assets. Simply call all the financial services firms that you have relationships with and verify that their policy is to never send money out of your account without verbally verifying the request directly with you. While many firms have adopted this policy in recent years, it is not a law, so you cannot assume you are protected. If the firms you work with do not have a formal policy specifically requiring verbal authorization, you may request that your account be handled in this manner.

I would further ask to have your request confirmed via letter or by email (trust me, the irony of the latter form is not lost on me). It’s a simple step that could literally save you thousands.

While this advice may not help increase your return on your investments, it may help you from worrying about the return of your investments.A few weeks ago, I received an email from a client requesting that I wire money to a Western Union office in London. The brief email stated that he had been mugged and now needed $1,500 to get back to the United States.

While my first response was a mix of panic and compassion, my second was suspicion. I had spoken to the client just a few weeks earlier and he hadn’t mentioned an international trip on the horizon. However, the email was from his standard account and the sender used my first name in the salutation. Added to that was the fact that it wasn’t an outrageous amount of money being requested. I had to consider that it might just be legit.

I replied to the email stating that I suspected his email was hacked and that I was not going to send the money without speaking with him first. Moments later a reply came back saying, indeed it was my client, he had been mugged and he really needed the money sent ASAP! I thought, wow, either this email hacker is really good or my client really is in trouble in London.

Not convinced one way or another, I picked up the phone and called my client’s home number. Sure enough, he picked up the phone. While he was safe and sound at home, his account had indeed been hacked. Not only was I grateful he was okay, we were both grateful I was cautious.

While the ease of instantaneous global fund transfers provides some significant convenience, it’s not without risk. The truth is, once the money leaves your account it is almost impossible to get back. Ninety-percent of the time, wire fraud involves email hacking.

Very simply, email hackers go through your address book and look for previous emails from financial services firms as well as grab your personal email address book. They then create personalized emails directly to individuals that, on the surface, appear very believable. So believable, in fact, that it’s estimated that nearly $300,000,000 (that’s million, folks) will be lost to wire fraud this year in the US alone.

Fortunately, there is an easy solution for protecting your assets. Simply call all the financial services firms that you have relationships with and verify that their policy is to never send money out of your account without verbally verifying the request directly with you. While many firms have adopted this policy in recent years, it is not a law, so you cannot assume you are protected. If the firms you work with do not have a formal policy specifically requiring verbal authorization, you may request that your account be handled in this manner.

I would further ask to have your request confirmed via letter or by email (trust me, the irony of the latter form is not lost on me). It’s a simple step that could literally save you thousands.

While this advice may not help increase your return on your investments, it may help you from worrying about the return of your investments.