Plan Sponsors Frequently Asked Questions

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How often should our company review different 401k vendors?

It is advisable to review other 401k vendors about every 3 years. The 401k market is constantly changing with vendors improving their product and lowering their fees. Also your plan may have grown to a size where you can receive the next level of service and pricing.

What is a fiduciary?

A person who exercises any discretionary authority or control over the management of a retirement plan or its assets. This can include the employer, its officers, and any trustee.

How do we satisfy Section 404c?

  1. The plan must offer at least three diversified investment alternatives
  2. A participant must be given:
    1. Description of the investment options available under the plan and their investment objectives
    2. Risk and return characteristics of each investment options, including information relating to the type and diversification of assets comprising the portfolio of the designated investment option.
    3. Identification of any designated investment managers.
    4. Participant must be given a reasonable opportunity to give investment instructions, in writing or otherwise, and receive written confirmation of his/her investment instructions.
    5. Participant must be able to change investment instructions at least once every three months.
      1. Specify the circumstances in which participants may give investment instructions, including an explanation of any specified limitations on the instructions under the terms of the plan.
      2. Define any fees and expenses under the plan.
      3. Make the name, address, and phone number of the plan fiduciary available upon request.

Are employee 401k educational meetings required?

Yes.  Plan sponsors have a fiduciary responsibility to help employees understand their plan. This is normally satisfied with periodic enrollment and educational meetings.

What are the benefits of continuing the company match as opposed to doing away with it?

The match helps increase employee participation and gives employees an incentive to contribute more to the plan.  This creates a more productive work force and potentially lowers plan cost through volume discounts. A matching contribution also helps the highly compensated employees contribute a higher percentage of their salary to the plan.

What are the alternate ways to save the company money without eliminating the company match?

  1. Charging allowable plan fees to plan participants.
  2. Increased participation may sound counterproductive for plans looking to reduce expenses, but it can also lower costs through volume discounts.
  3. Lower the matching contribution percentage.
  4. Consider switching to a discretionary profit sharing plan. This allows you to withhold payments to the plan when goals aren’t met and reward employees when goals are met.

Together we will make a plan.