PLAN SPONSOR QUESTIONS & ANSWERS
Q. Why should I be concerned about my employees'
retirement account investment performance?
A: You have undoubtedly spent a lot of time, effort and expense developing
a great retirement plan for your employees. Will your time, effort and
expense be rewarded if your employees don't realize respectable investment
returns? During the period 1986 through 2005, the average equity investor
earned an average of 3.9% annually while the S&P rose at an average
annual rate of 11.9%.¹ Why the dramatic underperformance? Quite simply,
most average Americans do not have the time or knowledge required to optimally
manage their retirement accounts.
Q: What is personal 401(k) management (managed
accounts)?
A: StraightLine provides 401(k), 403(b) and 457 investment management
for plan participants who prefer having an absolutely independent third-party
research team manage their investments within your plan. Keep in mind,
we don't just give advice—we actually manage the participant's investments—making
changes to allocations as needed throughout the year as economic conditions
dictate.
Q: We already offer educational seminars to our
employees. Isn't that enough?
A: Educational seminars can be great tools for educating employees
about the generalities of investing. Seminars do teach your employees not
to put all of their eggs in one basket, but that is generally as far as
they go. Determining the proper allocation and continually monitoring the
need for adjustments is serious business and requires highly-advanced analytical
tools. Tools that continually follow manager changes, style drift and daily
performance reviews are essential and cannot be adequately learned or reviewed
in a seminar.
Q: Our plan provider gives advice to our employees
-or- we provide an on-line advice service for our employees. How is StraightLine's
Pro(k) service different?
A: Like education, an "advice" component still leaves the burden
on the employee to interpret and make needed account changes. Studies show
that when offered advice, most employees either do not act on that advice,
do not implement all of the advice, or do not implement the advice in a
timely manner. In fact, a recent survey by Delloite Consulting found that
less than 7% of 401(k) participants who had access to advice actually used
that advice to manage their 401(k) investments.² StraightLine's Pro(k)
managed account service solves this problem. A StraightLine advisor will
sit down one-on-one with each of your employees to customize an investment
strategy. Our research team will then implement that strategy, monitor
the investments and make changes as needed.
Q: What is the cost to my company for StraightLine's
Pro(k) service?
A: You can offer this valuable service to your employees at no cost
to your company.
Q: Who pays StraightLine's fees?
A: The employees typically pay the fee (often directly from their plan
account), although some employers have chosen to pay the fee as part
of the compensation package for all or a select group of employees.
Q: What is the annual fee for Pro(k)?
A: The annual fee ranges from $200 to $500 per employee per year based
on the value of the employee's account. The maximum fee is $500 for accounts
with balances over $50,000. There are no other fees or commissions
paid to StraightLine by anyone in connection with this service.
Q: What about fiduciary liability to my company?
A: The Pension Protection Act of 2006 has eliminated any risk associated
with providing much needed professional account management services to
employees. The PPA, in its effort to encourage employers to provide advice/managed
account services to employees, has shifted the fiduciary liability to
the advice/managed account providers like StraightLine.
Q: Are you trying to sell me a new 401(k) plan?
A: No. StraightLine does not sell 401(k), 403(b) or 457 plans. Our
sole objective is to actively manage your employees' retirement investments
within your existing plan. This ensures that all of StraightLine's investment
decisions made on behalf of your employees are solely in their best interest
and not for the benefit of any plan provider or mutual fund.
Q: Do all of my employees have to use StraightLine?
A: No. Your employees individually choose whether they want to retain
StraightLine to manage their plan investments.
Q: Can you help us evaluate our current plan,
or help us select a new plan provider?
A: Yes. Since StraightLine is both independent and unbiased, we can
provide you with an objective review of your current plan or other plans
you may be considering.
Q: How do you make changes to my employee's
portfolio?
A: By electing to use our service, your employee agrees to share with
us their current user name and password for the limited and secure purpose
of repositioning the account.
Q: Is it safe for my employee to share their
password with StraightLine?
A: Absolutely. There is no way for us to remove funds because we are
not the account owners. Actions such as removing funds and changing beneficiaries
require written documentation that can only be sent to and signed by the
account owner. StraightLine takes every precaution to ensure the security
and confidentiality of our clients’ accounts.
Q: How often do you make changes to portfolios?
A: Our research team continually reviews market conditions, world events,
and other factors that affect the value of the retirement plan. Based
on that information, we typically make one to three proactive changes
to each portfolio per year as determined by the research team.
Q: Can retirees enrolled in the plan use this
service as well?
A: Yes. The fee structure and approach is exactly the same for retirees
and current employees.
Q: How do you communicate with my employees?
A: We use a combination of e-mail, phone calls, and postal mail to
update employees on changes to their portfolios. Every time a change
is made to their account allocations we will notify the employee.
Q: How are you different from other Financial
Advisors?
A: Many financial advisors certainly offer valuable advice, but most
rarely have the time or institutional research tools required to expertly
and actively manage an individual’s 401(k), 403(b) or 457 retirement
accounts. StraightLine utilizes state-of-the-art institutional research
tools to constantly monitor these accounts—allowing us to make changes
as needed throughout the year.
Q: How can I offer StraightLine's Pro(k) managed
account service to my employees?
A: We will be happy to sit down with you and discuss ways to offer
our service to your employees. We realize that every company is unique
and we will tailor the program to meet your specific needs, ensuring that
it works for both you and your employees.
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