Perhaps the first option to focus on is that one that involves “paying back” or “not paying back.” The rules, while straightforward to financial professionals, may be less apparent to retirement savers.
Basic Members
One of the biggest risks inherent in MEPs/PEPs is coordinating all of the many moving pieces. Here’s why people might be wrong to think they know enough about assembling a 401k MEP/PEP and regulatory compliance only heightens the potential liability.
Today, directly or indirectly (“back door”), every wage earner can contribute to a Roth IRA. So, to benefit your (great)(grand)child through “long term investing”, you might consider funding a Roth IRA and/or Roth 401k.
The most pertinent issue may not be the fiduciary imperative, but the marketing imperative. This makes things extremely difficult for the 401k plan sponsor who may sometimes confuse which has priority. Here’s an example of why a plan sponsor might be concerned.
Do you know the answers to the most important MEP/PEP questions – or do you only think you know the answers to the most important MEP/PEP questions?
“That is one of the key weaknesses of the SEC’s Reg BI. It allows brokers to claim they are working in an investor’s best interest without being held to a legal duty of loyalty”
If plan sponsors want to alleviate retirement angst among plan participants, they need to ensure they provide full transparency regarding factors that extend beyond the plan. Plan sponsors have an obligation to explain their retirement benefits within the context of these outside factors.
Despite the better intentions of finance professors a generation ago, the market regularly fails the efficiency test. The scary reality is not a question of what degree of market inefficiency exists, it’s that market inefficiency exists at all. And that can harm investors.
Ultimately, if you want to protect yourself and others from making simple mistakes, you must embrace the sin that first birthed those missteps.
The proliferation of investment options promised participants a plug-and-play plan. In the process, it created a 401k Frankenstein monster of a mess.
