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401(k) fees are a hot topic of conversation if you are an HR leader. When Miltec UV Human Resources Director Karen McKernan was discussing 401(k)s with an old friend, she discovered that Miltec, a small manufacturer, paid much more in fees than her friend’s larger employer. She was aghast, but what could Miltec do about it? The company did not have the purchasing power of a large firm, and so its options seemed limited.

Not so fast. Soon after that conversation, McKernan started receiving emails from the NAM about its new multiple employer plan, the Manufacturers Retirement & 401(k) Savings Plan, which allows many companies to participate in one 401(k) plan. Not only does the larger number of participants lower the fees, but the plan offers administrative and compliance oversight, as well as other benefits.

After doing her research, McKernan was convinced. By mid-2022, she was working with the NAM, the plan administrator, and recordkeeper and service provider Principal to make the switch. On Nov. 1, 2022, the new plan went live for Miltec employees. Today, McKernan says, she would never go back.

The benefits: Once McKernan laid out all the advantages for Miltec’s owners and 401(k) trustees, NAM 401(k) was an “easy sell,” she told us.

• Not only did the fee reduction seem like a “no-brainer,” but the new plan would lift a considerable administrative burden that had fallen entirely on McKernan. It would also offer benefits to employees that Miltec, as a small company, could not add on its own without creating even more administrative tasks.
• Furthermore, the NAM 401(k) comes with an independent 3 (38) investment fiduciary, One Digital, which reviews the funds’ performance regularly and issues reports on a quarterly basis, ensuring low-performing funds are “watched” and subsequently removed and replaced when needed. By delegating investment decisions under this arrangement, a company significantly reduces its potential liability for poor investment decisions.
• Additionally, any plan with more than 100 participants must undergo an annual audit, which is time consuming and expensive. Under NAM 401(k), the plan coordinates and manages the audit for participating companies.

What she doesn’t miss: McKernan listed all the duties she used to perform for Miltec’s own 401(k), which have now been taken over entirely by the NAM’s plan. She doesn’t miss:

• Monitoring enrollment, which Miltec’s employees can now undertake directly on Principal’s website;
• Sending out many required annual notices;
• Compliance testing and 5500 filings (which ensures the plan meets the IRS’s requirements for retirement plans, so that employees can receive tax benefits);
• Sending out summary annual financial reports and quarterly statements; and
• Handling employees’ questions and all communications about the plan.

In contrast, McKernan now only provides information to Principal through an automated payroll report and keeps an eye on how things are going, just in case. There have been few problems, she told us, and those were fixed with alacrity by Principal and the NAM.

Implementation: The entire timeline, from learning about NAM 401(k) to finalizing the switchover, took no more than a few months, McKernan said.

• Principal oversaw the transition, with weekly check-ins, a dedicated project manager and a schedule that included clear deadlines. While transitioning 401(k) plans is “a project,” McKernan said, Principal “managed it very well, including all required communications, and finishing right on time.”
• A word of advice: “If I had to do it all over again, I would have moved the plan over on Jan. 1 instead of Nov. 1,” said McKernan. Having two different plans in one year proved to be more of a headache than she expected, as it forced Miltec to do compliance testing on both plans in 2022.

The reception: “The company’s employees and owners are very pleased with the new NAM plan,” McKernan said.

• Aside from the savings in time and money, NAM 401(k) offers a host of other features that manufacturers can customize. One new feature that has proved popular with Miltec’s employees is loans, noted McKernan.
• In addition, Miltec’s previous plan had a 12-month waiting period before employees could participate, but NAM 401(k) reduced the wait to six months—which is far more appealing to new hires, she added.
• Ultimately, Miltec’s leaders and employees understood and appreciated the logic of joining a multiple employer plan, said McKernan. “They recognize the more participants you have, the more buying power you have. They are seeing the positive results of having access to a robust fund lineup and how that translates to lower fees every time they receive a quarterly statement.”

The bottom line: “I honestly don’t see how a small manufacturing company wouldn’t benefit from joining the NAM 401(k),” said McKernan.

• “I’ve been in HR for a very long time, and when we talk to job candidates about benefits, the 401(k) plan always comes up. It’s a benefit that is necessary to attract talent, as well as help your employees meet their retirement goals,” she added.
• “I wouldn’t hesitate to recommend this plan to any small, medium or large manufacturer.”