Tag: 401k plan

Five Areas Every Plan Sponsor Should Review

Offering a 401(k) plan is one of the most valuable benefits a business can provide. It can help attract and retain employees, improve retirement readiness, and create tax advantages for both the company and its workforce.

But sponsoring a retirement plan also comes with responsibilities.

Many business owners assume their recordkeeper, advisor, or third-party administrator is handling everything behind the scenes. While these partners play important roles, the responsibility for overseeing the plan ultimately remains with the plan sponsor.

The good news? Most compliance issues are preventable when plans are reviewed regularly and proper processes are in place.

Here are five areas every plan sponsor should evaluate.

1. Plan Documents and Required Updates

Retirement plan regulations continue to evolve. Recent legislation, including the SECURE Act and SECURE 2.0, has created new requirements and opportunities for many plans.

An outdated plan document can create compliance concerns, even if the plan is operating correctly.

Consider asking:

·       Have required plan amendments been adopted?

·       Are plan documents current?

·       Are Summary Plan Descriptions and required disclosures being distributed on time?

2. Fiduciary Oversight

Serving as a plan fiduciary carries legal responsibilities. Many plan sponsors are surprised to learn that fiduciary duties extend beyond simply offering a retirement plan.

A prudent fiduciary process typically includes:

·       Regular review meetings

·       Investment monitoring

·       Fee benchmarking

·       Documentation of important decisions

Strong documentation can be just as important as making the right decisions.

3. Employee Contributions and Eligibility

One of the most common compliance issues involves the timing of employee contribution deposits.

Employee deferrals should be deposited into the plan as soon as administratively possible. Most of the time, employee contributions need to be made within 2-5 days, depending on the cadence. Delays can trigger corrective actions and potential penalties.

Plan sponsors should also confirm that eligible employees are allowed to participate on time and that employer contributions are calculated correctly.

4. Compliance Testing and Regulatory Filings

Many plans are required to complete annual testing and reporting requirements.

These may include:

·       ADP/ACP nondiscrimination testing

·       Top-heavy testing

·       Form 5500 filings

While service providers often assist with these tasks, plan sponsors should still understand what is required and verify that deadlines are being met.

5. Participant Communication and Education

A compliant plan is important. A successful plan is even better.

Employees are more likely to appreciate and utilize a retirement plan when they understand how it works and how it can help them achieve their goals.

Plan sponsors should consider:

·       Whether required notices are being delivered

·       The quality of employee education resources available

·       Opportunities for ongoing financial wellness support

Common Warning Signs

During retirement plan reviews, we often see similar issues appear repeatedly:

·       Outdated plan documents

·       Late contribution deposits

·       Lack of fee benchmarking

·       Limited fiduciary documentation

·       Missed participant notices

·       Infrequent plan reviews

None of these necessarily mean a plan is failing. However, they may indicate that a closer review is warranted.

When Was the Last Time Your Plan Received a Second Opinion?

Even well-run plans benefit from periodic reviews.

A fresh perspective can help identify potential risks, uncover opportunities for improvement, and provide confidence that your plan remains aligned with your goals and fiduciary responsibilities.

If it’s been a while since your retirement plan has been reviewed, we’d be happy to have a conversation.

Schedule an introductory call with our Senior Financial Advisor, Angela Hall, CFP®, to discuss your plan and determine whether a comprehensive retirement plan review makes sense for your organization.