Broker Check
401k Administrator Refresh

401k Administrator Refresh

March 03, 2024

Many of you are business owners first and way down the list of hats you wear is 401K administrator and trustee. This isn't something you want to focus on daily but a periodic review of the plan provisions and health should be part of your routine. It might have been years since the plan was established and so here is a guide for reviewing one of your most important employee benefits.

 

  • What were the initial goals for the plan and how has this kept up with your company's growth?
  • What challenges do you have and where can the plan be improved?
  • When is the last time a provision was changed such as adding Roth or auto enrollment?
  • Is the plan up to date with the current Department of Labor guidelines?

 

Now let’s look into the choices offered by the plan to employees

 

  • Are employees being auto enrolled and if so, at what percentage?
  • What is the QDIA (qualified default investment alternative)? Generally a target date fund is recommended.
  • Is a match offered and does it qualify for the safe harbor?
  • Are Roth contributions allowed? If not, add to benefit younger lower compensated employees primarily.
  • Are after tax contributions allowed? If not, this may be attractive to higher earning, more sophisticated employees.
  • What does the employee education calendar look like and are they utilizing the tools offered?

 

Costs must be considered alongside value

 

  • What is the plan cost and how is it paid? Pricing for 401K plans can be complicated and a good place to start is the 408(b)(2) and 404(a)(5) notices.
  • Are you paying a third party administrator separately or is this built into the plan cost (bundled)?
  • Are their credits from the record keeper that can be applied to plan cost or contributions?
  • Are the expense ratios for the funds competitive or are indirect fees being buried in inflated costs to participants?

 

We hope this review was useful and if you are not able to answer the above questions and need help reviewing your companies 401k plan, please email rschultz@nwfadvisory to start the conversation.