The Wall Street Journal recommends Pension Systems Corporation's unique "self-service" 401(k) design as an easy-to-use, inexpensive solution for small businesses that want to offer employees a 401(k) plan. The WSJ article compared this 401(k) for small businesses to Quicken as an affordable and easy-to-use accounting and invoicing solution for small businesses. To view the WSJ article and press release, please click here.
Pension Systems Corporation holds the United States Patent 6041313 for its highly regarded self-service 401(k) technology. The invention specialized in 401(k) plans for small businesses. PSC's patent re-configured the traditional 401(k) administration process. In the conventional 401(k) plan administration model, a company's 401(k) assets are all co-mingled and pooled together, and the conventional 401(k) administrator tracks each participant's holdings within the commingled asset pool. Pension System's unique design does not combine or co-mingle participants' 401(k) assets. Instead, it uses separate self-directed brokerage accounts to maintain and track participants' investments.
(Summary) In conjunction with Union Bank of California, Pension Systems Corporation developed 401(k) Easy Online, a web-based 401(k) plan administration service based upon the success of the 'run-it-yourself' pc-based 401(k) Easy.
Reprinted from THE WALL STREET JOURNAL.
YOUR MONEY MATTERS
By JEFF D. OPDYKE
Staff Reporter of THE WALL STREET JOURNAL
Tom Hendricks's employer recently adopted a 401(k) retirement plan for him and his colleagues. Big deal, you say? Well, it is. Mr. Hendricks and the 13 managers who oversee trust-fund operations for a California union have never had access to the hugely popular retirement accounts because of the expense and complexity of running them.
Now, though, cheap and efficient technology is changing those notions. Easy-to-use software and low-cost, back-office support - much of it available online - are opening retirement-savings benefits to an estimated 27 million small-business workers who don't have retirement plans. It's also allowing companies with inflexible and meager plans to upgrade to more appealing, full-blown 401(k) by pushing down administrative costs and challenging the idea that small-business owners can't manage the rule-bound accounts. (more available from WSJ)
Union Bank of California, N.A., Pension Systems Corporation, Launch Web-based 401(k) Administration Service for Small Businesses
LOS ANGELES Union Bank of California (UBOC), N.A., and Pension Systems Corporation have jointly developed a web-based 401(k) plan administration service based upon their existing desktop product. The service allows clients to set up and manage low-cost, option-rich "run-it-yourself" 401(k) plans from any location connected to the Internet — be it via computer terminal, web-enabled mobile phone or PDA device; access via a toll-free automated voice response system is also available. Like the desktop product, the system is geared particularly toward serving small businesses of one to 100 employees.
The new online service called 401(k) Enginuity (www.401kenginuity.com) affords employers plan-specific, convenient access and rapid processing of data and information requests relating to all areas of 401(k) administration activity, including point-and-click plan compliance testing with results potentially in seconds. Other features include participant account access, investment education materials and enrollment seminars via web casting. (More Available from UBOC)
Background of 401(k) Easy Form Inception to Today
401(k) Easy's design is based upon James Gilbert's knowledge and experience with retirement assets as a Merrill Lynch executive specializing in retirement plans. Mr. Gilbert's understanding of the complexities of traditional 401(k) plans led him to design a unique 401(k) model, just as 401(k) plans were gaining popularity with small businesses. Mr. Gilbert understood how traditional 401(k)s were organized and administered and what needed to be done to improve accounting, track participants' savings, expand investment options, and eliminate constant human errors. Mr. Gilbert wanted a 401(k) that concentrated on small businesses and decided that only business owners, not the company’s employees, should pay the total cost of the company's 401(k). Mr. Gilbert’s vision was that 401(k)s should give participants the freedom to select and "self-direct" an expanded lineup of qualified investment options. Most importantly, at no point would Mr. Gilbert’s 401(k) charge or skim fees or extract commissions from participants' 401(k) retirement assets.
Plan Investment offerings would concentrate on no-load mutual funds and index funds and eventually include commission-free stock and bond trading. Based on Mr. Gilbert's experience and vision, this unique business model became the foundation of 401(k) Easy's design. Ironically, it was Mr. Gilbert's solid working relationship with Charles Schwab that today offers free 40(k) accounts to 401(k) Easy, which are all self-directed and available online, insured by SIPC, and available 24/7 from a Schwab website that operates entirely independently and unconnected to 401(k) Easy's websites. If 401(k) Easy's website is offline, 401(k) participants are in no way inconvenienced, as they have direct, password-protected access to their Schwab personal self-directed 401(k) account 24/7, whether the 401(k) Easy website is online or offline.
In 2000, Mr. Gilbert was awarded a U.S. Patent 401(k) for software that used individual 401(k) accounts rather than traditional 401(k) administration “pooled” arrangements: [US Patent 6041313 awarded in 2000 for 401(K) USER SOFTWARE]. This patented 401(k) methodology departed from the traditional 401(k) plan administration model. Traditional 401(k) providers deposited all company employees' 401(k) assets in a collection of investment-themed “pools" and tracked each person's percent interest in each “pool” selected by the participant. Moving assets from one investment pool to another was complex and prone to human errors. Should a 401(k) participant leave the company and need a distribution, the 401(k)-provider had to calculate precisely to the penny what percentage of each pool the participant owned, extract that amount from the pool, and send the proceeds to the company’s plan sponsor for distribution to the participant. Pre-tax 401(k) contributions were constantly deducted from payrolls and sent by the employer to the custodian directly, for deposit in a collection of portfolio pools. The pools were managed by investment advisors, who selected the equities and bonds that should be bought and sold by the pools. The 401(k) participants had no say in the investments, and mistakes were made continually. The pools were named after different investment categories, such as "growth fund" or "international fund." Still, the number of pools was usually limited to less than 10 investment options for 401(k) participants.
The 401(k) plan provider’s costs were high, and the work was labor-intensive. Their job was to track each person's percentage interest in each pool daily so that when someone wanted to know their balance or was leaving the company, their assets would be calculated as a percentage and debited from the pool. The proceeds will be sent to the plan sponsor. This approach was expensive to maintain, difficult to administrate, and fraught with problems and errors.
Mr. Gilbert took a different approach. What is today known as 401(k) Easy was a new kind of 401(k) recordkeeper that did not deposit millions of 401(k) retirement dollars into co-mingled pools. Instead, Mr. Gilbert convinced significant mutual funds like Putnam, MFS, Transamerica, and Vanguard, and discount brokerages like Charles Schwab, E-Trade, and TD Ameritrade to open separate individually numbered accounts, one account for each new 401(k) participant, just as they were doing for their regular customers. These individual self-directed accounts would be custodied properly, giving 401(k) participants an extensive selection of qualified 401(k) investment options, including no-load mutual funds, index funds, and commission-free stock and bond trading.
401(k) Easy clients were free to choose their custodians and investments. participants could view the value of their accounts, observe their tax-advantage funds being deposited into their accounts, and change their investment choices online. Charles Schwab offers participants free self-directed 401(k) Easy brokerage accounts, providing daily asset views and access to over 4,000 investments, including no-load funds, index funds, and free stock and bond trading. If the participant leaves the company, their funds can be promptly and seamlessly transferred into an IRA rollover. Easy has collaborated with Schwab for over 30 years, and Schwab is currently the default option for new 401(k) Easy plans. The 401k User Patent made traditional pool 401(k plans nearly obsolete. Today, custodians like Schwab manage most 401(k) assets, insured by the SIPC.
401(k) Easy guarantees participants will never pay fees from their retirement savings. Easy has never touched a single penny or taken constructive receipt of anyone’s assets. Businesses using 401(k) Easy transfer assets to Schwab, which then returns them directly to the company. 401(k) Easy's job is not to physically handle or manage actual monetary retirement funds but instead to track and record every transaction to and from every Schwab account number, from start to finish years later. No person’s retirement assets are ever co-mingled with another person's retirement assets. That is the essence of the U.S. Patent 6041313 yielded a -administration application that took a year to compile, and another year to test. Union Bank of California performed testing before the application was released and put into use. The comprehensive U.S. bank-certified testing ensured participants’ financial security, instills confidence in retirement savings, and fully supports the AARP's animus towards fees. The Wall Street Journal reported on 401(k) Easy when it was launched and called the 'Quicken' for small businesses wanting to run their own 401(k) plans 'in-house,' using a 'run-it-yourself' approach to maintain control and to save money. A full-service 401(k)-provider costs at least five times more than a self-managed in-house system with professional support. More critically, the comprehensive financial institution, in collaboration with financial advisors, makes investment decisions on behalf of employees, accruing fees and assuming control over the assets.
401(k) Easy is the sole online provider that does not deduct fees, including no AUM-based 401(k) fees, as a search engine can verify. Many financial advisors are posing as 401(k) providers to access retirement assets. Consider reviewing the final page of most provider websites. SEC required website disclosure by financial advisory firms collecting fees from assets]. The U.S. SEC requires these 401(k)-providers to disclose any SEC-registered financial advisor connections. Financial advisors registered with the SEC charge asset-based and other AUM fees for managing assets. At 401(k) Easy, we do not dispense financial advice, are not an SEC-registered financial advisory firm, and are committed to transparency, ensuring that plan sponsors and participants are fully informed about where their money is going and how it is managed. This transparency provides users with the information needed to make thoughtful and informed decisions about their retirement savings.
At 401 (k) Easy, the employer is the only entity that pays the expenses for the company's 401(k); employees pay nothing to use the company’s plan. 401(k) Easy plans do not include fees, deductions, or commissions taken from participants' accounts. Nonprofit AARP has extensively researched the devastating harm these fees have caused millions of their members. The results of AARP’s report regarding the irreversible damage of 40(k) fees including unnecessary AUM-based 401(k) fees, are shocking. According to the nonprofit AARP, the average person using a company 401(k) to save for retirement will pay out an astonishing $155,000 in unnecessary fees to the 401(k)-providers and their financial advisor-partners. In many cases, according to AARP, these skimmed fees are hidden inside other charges, and not disclosed., 401(k) Easy regards nondisclosure as a form of “401(k) fees pickpocketing.”
401(k) fees, including AUM 401(k) fees, can result in a significant, irreversible reduction of up to 40% in participants' retirement savings due to unnecessary deductions and charges. 401(k) fee skimming never happens to users of 401(k) Easy, but skimming is happening to 99.999% of all Americans participating in 401(k) plans today. Today, these losses are referred to as "401(k) junk fees and AUM fees". Thousands of people have filed national class action lawsuits demanding the return of fees skimmed from their retirement assets over the years. The U.S. Supreme Court has unanimously approved the continuation of these class action lawsuits. U.S. Supreme Court rulings allowing class action lawsuits against fees].
401(k) Easy participants’ accounts are self-directed and domiciled within a qualified custodian. For example, Schwab’s website offers access to over 4,000 investment options and allows participants to review, monitor, and change their choices anytime. This control, flexibility, and transparency empowers participants to make informed decisions about their retirement savings. 401(k) Easy web does not control the 401(k) assets custodian web. If 401(k) Easy web goes offline, the custodian web remains online and functional. 401(k) Easy plan participants still enjoy uninterrupted access and control over their self-direct accounts and monitoring of their retirement assets from the Schwab website.
401(k) Easy does not offer investment advice or manage participant accounts. If a participant wants or needs a financial advisor’s advice, they can hire any adviser. The cost of the advisor is borne by the participants and is not paid by either the employer, 401(k) Easy, or deducted from assets. Financial advisors are specifically barred from connecting to a participant's self-directed Schwab account and deducting fees or commissions when the plan uses 401(k) Easy.
The employer is not charged for the financial advisor, and the User Agreement bars financial advisors from connecting or skimming fees from 401(k) Easy bars the financial advisor from linking to or deducting or skimming fees from a participant's account. If an applicant wants investment advice, they must pay for it directly with after-tax dollars. 401(k) Easy guarantees no fees, commissions, or charges will ever be skimmed from any 401(k) or AUM assets t any time, or for any reasons. 401(k) Easy’s features, such as the ability for participants to inspect and change their investments 24/7 and guarantee no fees or commissions, set us apart from other 401(k)-providers and ensures a transparent and cost-effective retirement savings solution.