2018 marked the 40th birthday of the 401(k) plan. Since its inception, the defined contribution plan has evolved and become increasingly complex to manage. There’s a lot to consider, including changing fees and compliance issues, to name just two.
As an employer, you need to fully recognize your responsibility to your employees when it comes to your 401(k) plan. Confirm that you’re satisfying your fiduciary duties, acting on behalf of every plan participant, and offering the right menu of investment choices at a reasonable cost.
Here are some best-practice guidelines to 401(k) management:
Form a multidisciplinary committee to oversee your plan.
- Form a multidisciplinary committee to oversee your plan. This typically includes your owner or president, CFO or other high-ranking financial leader, an HR representative, and possibly someone who represents rank-and-file employees. Make sure your committee meets on a regular basis and that its activities and decisions are well-documented. Charge the group with creating a policy statement that creates structure and ongoing dialogue around your 401(k).
- Provide an investment menu. Your committee acts on behalf of everyone enrolled in your 401(k) plan – not on an individual basis. It’s essential that they offer both aggressive and conservative investment options. There also needs to be mechanism in place to swap out underperforming funds.
- Understand your legal responsibilities. Know what “fiduciary” really means Fiduciaries are obligated to act in the sole interest of plan participants For instance, make sure your 401(k) plan adheres to governing documents and the law, offers diversification, and has reasonable fees.
- Consider your plan design. Know the basics of 401(k) plan design and how it influences savings behaviors and outcomes. For example, automatic enrollment can be a very powerful model to boost participation and help employees focus on their financial priorities. As reported by the Society for Human Resource Management (SHRM), plan participation at one company grew from 74 percent to 93 percent in four years, once auto-enrollment was introduced. Another catalyst to higher participation levels is matching contributions.
Looking For A Specialist’s Help?
Finding time to address all the tasks and responsibilities associated with administering a 401(k) plan can be daunting. Lyons HR can help, thanks to our highly experienced and qualified specialists in retirement plans and fiduciary needs, as well as general HR and benefits administration. In addition, we are an ESAC- accredited professional employer organization (PEO). Contact us today to learn more.