401(k) Pro's affiliate, Pension Service Associates (PSA), has been providing full-service 401k and other retirement plans since the mid 1980's.
-- PSA specializes in 401k plans for small and mid-sized businesses.
-- PSA was providing small businesses with affordable plans rich in investment options and plan flexibility long before other 401k providers even showed much interest in the small plan market.
PSA found that by diverging from the "big plan" administrative setup used by so much of the 401k industry and instead looking at the areas that seemed particularly inefficient and rethinking the process around them, it could cut administrative overhead and save clients money. For instance...
-- In traditional 401k plan administration, assets are pooled within investments and the administrator must track what portion of that pool belongs to each plan participant. PSA found this undesirable both from the individual investor's standpoint and from an administrative standpoint. PSA got mutual fund companies agree to set up INDIVIDUAL asset accounts for each plan participant, negating the need for PSA to do any per-asset, per-participant accounting. Participants instead receive monthly per-investment statements from the mutual fund company and monthly overall 401k account activity statements from PSA (summarizing participant contributions, employer contributions, loan withdrawals, loan payments, trust transfers, etc. by month, year and since joining the plan).
-- PSA created a prototype 401k plan for the IRS to approve that allowed for any of a range of choices for participant eligibility, employer contributions, 401k loans, and more to give clients the potential to create 401k plans that would prove popular with and beneficial to company employees.
-- PSA plans see participant rates that are nearly twice the national average.
-- PSA built and refined a 401k administration software system to streamline all areas of plan administration.
-- The highly efficient software system meant PSA was able to provide valuable services such as the monthly participant account statements as well as monthly compliance testing at no extra charge to its clients. Both the frequency of the services (other plans offered them, at best, quarterly or semiannually) and that they were offered at no extra charge was unheard of at the time, and frequent compliance testing is especially important to smaller plans because, with their limited number of participants, it only takes slightly out of balance contributions by a few highly compensated employees to overly offset those by nonhighly compensated employees.
By the mid 1990s PSA felt it had so refined this system that its clients could use a slightly more layman's version to run their 401k plans themselves -- and save even more money. Especially if the software was customized to each client's exact plan, PSA saw how simple it would be for plans with 100 or fewer participants to do the basic data input and money transfering themselves, because the software does all the bookkeeping work. Thus the creation of 401(k) Pro, Inc. to build a run-it-yourself 401k system from the PSA full-service system with the goal of creating a highly affordable yet quality and flexible 401k system.
-- 401(k) Pro chose to have 401k professionals work with clients in setting up their plans/deciding on their plan customization options, then to have software professionals customize each client's software to its exact plan to keep the client's monthly administration tasks down to a minimum.
-- 401(k) Pro was able to create a system that takes most of its small business clients less than 15 minutes month to use and that costs them less than $1000 year (less than $500 a year for small businesses with only a very few employees).
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