A debut book examines the 401(k) plan from an employer’s perspective.
Employers who implement a 401(k) plan for their employees may legitimately see it as both a valuable benefit and an administrative headache. Given the considerable effort it takes to build and maintain such a plan, this volume should relieve employers of some of the burden or, at least, point them in the right direction. Retirement advisers Everhart and Hanna, assisted by independent consultant/researcher Shwab, have constructed a useful handbook that comprehensively covers the key issues related to the establishment and administration of the 401(k). They begin with basic definitions of plan components, sure to be helpful for the uninitiated. The second chapter addresses engaging a retirement plan adviser. The authors, who represent an advisory firm, admit to “an obvious bias” in favor of this move, but they make a strong case for the value of “trained and credentialed” professionals by highlighting several specific benefits, including “Superior Process for Fiduciary Issues” and “More Reasonable Fees and More Efficient Vendor Management,” each a valid argument. A subsequent chapter explains fiduciary responsibilities and Employee Retirement Income Security Act requirements. The book also covers plan design (with a recommendation for “An Ideal Plan”), “secrets of plan pricing,” the management of vendors, the choice of investments, and plan participation, all explained in clear, concise language. The authors cite the very appropriate “90-10-90 goals” of a 401(k) plan, conceived by professor Shlomo Benartzi: 90 percent eligible employee participation, a 10 percent average employee deferral rate, and “a prudent asset allocation” by 90 percent of the participants. This kind of specific detail, attributed to experts, sprinkled judiciously throughout the book, distinguishes it as an authoritative source. In addition to deftly written general content, the volume employs numerous examples. Perhaps most useful are the “Four Success Stories” in the last chapter, which highlight different conditions, solutions, and results; the caveat, of course, is the solutions were conceived by the firm that employs the authors. Still, even if not entirely objective, the tales are pertinent and educational.
Informative and instructional; a valuable and rigorous 401(k) primer for any corporate executive responsible for employee retirement plans.