As a Christian business owner, you are already incorporating biblical principles into many aspects of your business, but what about your company retirement plan? Is it possible to honor God through your 401(k) plan, and if it is, what would that look like?
Fiduciary responsibility
Many business owners don’t understand the personal liability they take on as the fiduciary by being a company retirement plan sponsor. It’s your responsibility to select funds that align with your company’s Investment Policy Statement (IPS) and are appropriate for your employees.
You may think your advisor is doing this for you, but unless you are working with what is called a “3(38) fiduciary“ you still shoulder the responsibility for creating an IPS and selecting and monitoring funds that are appropriate for the plan and your employees. According to a 2018 study by the Center for Retirement Research at Boston College, the top three reasons for 401(k) lawsuits are: 1) inappropriate investment options; 2) excessive fees; and 3) self-dealing. These issues all relate to a fiduciary’s duties.
Solution: Hire a 3(38) fiduciary investment manager to shoulder much of the liability. A 3(38) fiduciary will ensure that your plan has an IPS and follows a prudent process for selecting investments for the plan.
Values-aligned investments
You might not have a deep understanding of the funds in the plan. As a result, it’s likely that you have selected funds that include business practices in the abortion and pornography industries and companies that prey on human addiction. It’s hard to avoid these business practices unless you are intentional about implementing a faith-based investing approach. As a fellow Christian business owner, I am guessing these are important to you.
I like to explain it this way: when you invest in businesses that support or promote cigarettes, you are praying that more and more children will get addicted to cigarettes so the company can make a big profit and share it with you. I believe that what we invest in makes a very big difference to God, and it is possible to invest in companies and funds that promote human flourishing instead of causing the suffering and destruction of our brothers and sisters.
Action steps:
- Have your fund line-up screened for business practices that don’t align with your values.
- Add faith-based investments to your fund line-up.
Stewarding your own finances
Are you paying too much in taxes? Business owners often find that they could save more on their personal taxes (and therefore use that money in other more efficient and effective ways) but they are unable to contribute fully to their 401(k), and in fact they often get a refund check at the end of the year.
This is due to poor plan design. The structure of your plan should allow you and the other owners of the business to also contribute to the plan – sometimes up to $250,000 per year – in order to most efficiently save for your own future while relieving some of your tax burden. You many need to make a small contribution to your employees but that just makes it a win-win for both you and your employees.
Action step: Schedule a review of your plan to determine if additional tax saving are possible.
Serving your employees
Most business owners I talk to want to take great care of their employees. Employees rarely have the knowledge and skill to create their own portfolio with a given a fund lineup and rely heavily on an advisor to guide them. Sadly, after the sale of a 401(k) plan, few employees are served well. I typically hear business owners say they haven’t seen or heard from their advisor in months or even years.
Solution: Hire an advisor who will serve your employees and assist in running your retirement committee meetings.
Transparent costs
Very few business owners have a clear idea of what they are paying for their 401(k) plan – and for good reason. The fees in a plan come from several different sources, and they are easy to hide so you can’t figure out the bottom line. It’s your fiduciary responsibility to know these fees so you can make the best choices for your employees.
Solution: Have an analysis of your 401(k) plan to understand what you are currently paying.
As a Christian business owner, honoring God with your business is a sacred privilege. Do you know if your 401(k) plan reflects your faith values? Do you have the time or expertise to act as your retirement plan’s fiduciary? Is your current plan designed to serve you and your employees well?
If you don’t know the answers, we’d like to help you find them. It is our joy to partner with Christian business owners to help them provide an excellent, God honoring 401(k) – what we call the Kingdom(k).
Schedule a call with Beacon Wealth Consultants to learn more about our 3(38) fiduciary services, faith-based investment options, and turnkey retirement plans.