The following scenarios represent actual client situations that have been improved through Alliance’s consulting and plan design services.
An east coast law firm with about 150 employees approached us with the following challenge: increase the contribution to the partner group without increasing our already generous contribution to our staff. We collected their employee census and presented 3 alternatives which, in varying degrees accomplished their stated objective. Contributions per partner were increased by over $20,000 with no additional contribution required for staff.
A Chicago law firm with 20 employees hired a new outside accountant. The accountant noticed that all of the firm’s partners had deferred the maximum to their 401(k) plan but only 3 staff people were deferring. Suspecting something was amiss the accountant asked us to review the plan which was, at the time, administered by the law firm’s payroll provider. We discovered that the payroll firm required the client to identify their own testing groups (which can be very complex) and, unfortunately they did not properly fill out the form. The law firm’s improper coding of their employees resulted in a passed ADP test – a good result based on bad information. In truth, the firm had badly failed the required test and hired us to help correct this violation. They now have a much healthier plan.
A suburban Chicago machine shop established a 401(k) plan for its 3 owners and 15 employees. They were sold a plan by their insurance agent. They were happy with the initial enrollment meeting and the handouts and had pretty good participation. Business was good, they bought another small machine shop and 6 years later they had over 50 employees and almost $2,000,000 in the plan. We were asked to meet with this client to review their plan. They told us the plan was pretty good, although they had a few concerns including the turnover of relationship managers at the home office of the insurance company. When we told them we thought they might be overpaying they said “no way, this plan is cheap, I think we pay about $2,000 per year, tops!” We then showed them that they may not be writing a large check, but they were paying for the plan by being charged extremely high fees on the investment funds. We prepared a spreadsheet and illustrated that if they used the same investment funds and accessed them directly through an open architecture program like Alliance they would cut their investment expenses by over $16,000! Over the 7 years they have been a client we have saved them over $100,000 on the total cost of their plan.