As business owners evaluate the state of their current company 401(k) plans, a pattern of common concerns arises. What are the biggest plan sponsor concerns and why are they
The following seven major issues are currently plaguing plan sponsors. If these issues haven’t yet raised a concern for you, maybe they should.
1. Participant Hardship Withdrawals
When a plan participant requests a hardship withdrawal fromtheir 401(k), it can create an awkward situation for everyone involved. The participantoften doesn’t understand why they can’t have immediate access to their own money, and, in many cases, the employer might agree with them. After all, whyshould they risk losing their home or some other financial crisis when theyhave sufficient funds to cover their needs sitting in their retirement account?
The flip side of this is the desire to protect employees from themselves. Even a small withdrawal now can have a major impact on your employee’s ability to retire comfortably in the future.
One thing everyone seems to agree on is that the ability to make withdrawals should be limited to some extent. The Bipartisan Budget Act of2018 (“Budget Act”) introduced new legislation that goes into effect on
2. Compliance Requirements
Everyone knows there are plenty of compliance requirements when it comes to maintaining a 401(k) plan. However, most business owners are simply too busy trying to maintain company profits to give it the attention it deserves. Most plan sponsors turn this responsibility over to third parties, but it’s important to understand that doing so does not relieve you of your ultimate responsibility. It’s always possible that the professional you hire can make a mistake, and if this happens, the liability still falls squarely
If you’re relying on your custodian to handle your compliance issues, you’re likely not as protected as you think you are. Many of these vendors do not take a proactive approach to ongoing compliance. You can save yourself a lot of headaches by ensuring that the third-party you outsource to is as concerned about keeping you out of trouble as you are. Note that selecting a vendor in itself is a fiduciary act, so you’ll need to pay careful attention to the services offered and the value they bring.
3. Business Sustainability
Let’s face it, if you can’t turn a profit in your business, there’s no need for a 401(k) plan because eventually there will be no salaries and no jobs. As a business owner, your number one priority is to maintain
With unemployment at the lowest rate since the
4. Low Employee Participation Rates
If you offer a plan but very few of your employees are participating, what good does it really do? Auto-enrollment can
It’s clear that auto-enrollment can make a big difference, but it’s not enough. You can improve your participation rates even further by working with a professional to provide quality employee education an ensure the enrollment process is easy. Increasing the employer contribution and
5. Insufficient Savings Rates
According to a recent survey by Bankrate, 65 percent of Americans aren’t saving enough for their retirement. Even worse, 20 percent aren’t saving anything at all! Employers who are concerned about their employees’ low savings rates can help by working with a third party to move away from the standard “quarterly enrollment meeting,” and instead provide interactive education opportunities designed to encourage them to save more.
6. 401(k) Plan Costs
It seems like you can’t go a single day lately without hearing about concerns over 401(k) plan costs. From administrative expenses to internal fund costs, recordkeeping expenses, and other expenses embedded in the plan, it’s the responsibility of the plan sponsor to know exactly what is being paid, to whom, and why.
If you’re not 100 percent clear on this, now is the time to find out, since failing to do so can land you in hot water. This leads us to the final, and possibly most important, plan sponsor concern.
7. Fiduciary Liability
The term “fiduciary liability” refers to the overall personal level of risk a plan sponsor takes on when offering a company 401(k) plan. While it’s certainly no fun, the discomfort created by this liability does
By giving YOU personal liability, the DOL has ensured that your best interests and those of your employees are one and the same. You don’t want to take the chance of being sued by your employees or facing serious fines, so you do everything in your power to make sure things are done right
Best Practices for Addressing Plan Sponsor Concerns
Now that you’re aware of the most important plan sponsor concerns, you’re probably wondering what to do about them. FiduciaryShieldprovides a unique service that addresses all of these issues and more. Contact us today to learn how we can give you peace of mind and help make 2019 your best year ever.