A 401k employee benefit plan (“EBP”) is a wonderful way to allow your employees to secure their financial health as they get older and consider retirement. Retirement plans are a very attractive quality in an employer and can foster an environment of dedicated employees who feel secure in their employment. However, as an employer offering an EBP, you are considered the ‘Plan Sponsor’ and have important responsibilities in the maintenance of your retirement plan.
One of the most prominent duties you have as a Plan Sponsor is to be prudent in your choice of investments made available to employees utilizing the plan. Luckily for you, this one is pretty easy! Many third-party administrators offer a wide variety of investments and can help you make choices that ensure your portfolio contains a healthy level of diversity. This takes the guesswork out of choosing funds for your employees and helps you to fulfill your duty as a Plan Sponsor.
However, good investment options are meaningless if the money doesn’t make it to the account! When you withhold contributions from employee paychecks, you also have a duty to deposit these funds timely. Ensure that your payroll or HR staff are comfortable with the process of segregating and depositing employee contributions as soon as possible. As a general rule, you should deposit these funds when you make your payroll tax deposit.
As much as your employees may trust you, the government isn’t taking their chances; you must also make sure to maintain coverage with an Employee Retirement Income Securities Act (ERISA) fidelity bond. This bond is like an insurance policy for your employees should any dishonest acts occur on the employer’s side when handling employee funds. It’s easy to find a provider by visiting the Department of the Treasury’s website and using their list of Approved Sureties.
Luckily for you, the last few responsibilities go hand-in-hand. Evaluating and choosing a good plan provider will help you to ensure that you are only paying “reasonable expenses” from the plan’s assets, as well as guaranteeing that all the administration duties (maintaining compliance, safely maintaining records and data, etc.) are taken care of for you. You are also required to ensure that expenses for the investments are reasonable. Any investment advisor that works with these plans can provide an analysis of the fees to help you determine this.
The internet is a great tool, but don’t just select the first company that comes up when you Google “401(k) plan provider”. Think about what you want from a plan and pick 3 to 4 providers to compare on the basis of cost, timeliness, and transparency.
Realizing that you have duties as a Plan Sponsor may sound daunting, but it is easier than ever to set up and maintain a profitable retirement plan for your employees. There are many resources out there if you’re considering a retirement plan for your employees, and the friendly ADKF team is one of them! Please feel free to reach out to our family of professionals with your questions or concerns. Keep in mind, if you already have a 401(k) plan with 100 eligible participants, you’re required to have your 401(k)plan audited. ADKF would love to discuss these services with you as well.