A suburban Chicago machine shop established a 401(k) plan for its three owners and 15 employees through 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 six years later they had over 50 employees and almost $2,000,000 in the plan.
Alliance was asked to meet with this company to review their plan. They were fairly happy with the plan, although they had a few concerns regarding the turnover of relationship managers at the insurance company. When we told them that 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 more than expected because they were 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's, they would cut their investment expenses by over $16,000.
Over the seven years they have been a client, we have saved them over $100,000 on the total cost of their plan.