Whether you鈥檙e a plan sponsor, administrator, or both, you鈥檙e considered the fiduciary of your company鈥檚 401(k) plan. This title comes with a lot of responsibility, but a good 401(k) provider can assist you in fulfilling those responsibilities.

A provider, generally known as a recordkeeper, handles participant data and accounts. This typically includes helping identify who鈥檚 eligible for your retirement plan and recordkeeping various aspects of the plan, such as participant deferral elections, contributions, participant investments, and distributions. A provider may also be tasked with:

• Producing quarterly participant account statements
• Producing tax reporting on distributions
• Offering resources and education for employees鈥� financial well-being
• Recording and distributing 401(k) loans and disbursements
• Updating you when the IRS or DOL announce regulation changes
• Producing participant notices required under federal regulations

Ensuring your 401(k) plan is legally compliant

One of your provider鈥檚 most important jobs is to help you ensure your plan is legally compliant. When changes are made to laws and regulations, your provider should communicate them to you鈥攁nd clearly outline any steps you need to take. In general, you should rely on your provider to assist with:

• Conducting required annual compliance testing: The IRS requires plan administrators to conduct nondiscrimination testing annually to ensure retirement plans don鈥檛 unfairly benefit company owners or highly compensated employees.
• Preparing your Form 5500: The IRS and DOL require this form annually for all retirement plans. In part, this form helps document the financial health of your company鈥檚 401(k) plan.
• Providing annual audit support: Generally, for plans with 100 or more participants with a balance on the first day of the plan year, you鈥檒l have to undergo a legally required audit. Your company will need to provide documentation, such as payroll data and time-stamped communications to ensure your plan meets regulations.

What you need to do

While there are many tasks your 401(k) provider can help you with, there are some you鈥檒l need to complete on your own or with another qualified entity or individual. Many times, your provider will have relationships with a qualified entity that鈥檚 integrated with their product offering to help you with tasks like:

• Giving investment advice to participants
• Taking fiduciary responsibility for the plan鈥檚 investment selection and monitoring
• Making plan design decisions
• Signing your Form 5500
• Assuming liability for contributions being timely and accurate
• Monitoring incomplete or missing participant data

A strong 401(k) plan can help you attract and retain talent鈥攁nd help your employees meet their retirement goals. That starts with choosing a good provider, one that鈥檚 reliable, trustworthy, and can guide you through the ins and outs of serving as a plan fiduciary.

Eric O鈥橠onnell is a director of retirement product development for Sentry Insurance. Sentry provides cyber liability, property, casualty, life insurance, and retirement products to dealers and other businesses. Learn more at .

Fiduciaries play pivotal roles in ensuring the integrity of a retirement plan. Generally, fiduciaries are defined as individuals who have discretionary authority over the plan or control over plan assets.

Federal law assigns certain responsibilities to plan fiduciaries. Fiduciaries are held to a legally defined standard, and many plan sponsors don鈥檛 have the expertise needed to meet all of their fiduciary responsibilities.

It’s up to you to hire service providers and consult experts to help guide your decisions. However, you鈥檙e ultimately responsible for the decisions you make鈥攅ven if you鈥檙e following the guidance of an expert.

Here are seven main responsibilities you have as a fiduciary:

1. Operate in the best interest of plan participants

Fiduciaries must avoid conflicts of interest and act solely in the interest of plan participants and their beneficiaries. Documenting key decision factors can help prevent the perception of favoring others at the expense of participants at the expense of participants.

2. Follow the plan documents

Plan documents are the foundation of your plan, outlining important terms and conditions. You should be familiar with the plan documents and ensure the plan operates based on its established terms. If you don鈥檛 follow the terms precisely, it could be considered a breach of your fiduciary duties, and your plan may experience an operational failure.

3. Make timely disclosures

You鈥檙e required to distribute annual鈥攁nd sometimes mid-year鈥攏otifications to your participants. These disclosures/notifications generally need to be made within 30 days of their due date. Events like the beginning of a new plan year or changes to investments trigger these required disclosures.

4. Diversify investments

As a plan fiduciary, your retirement plan investment lineup must be diversified to help reduce the risk of large investment losses. You should consider each plan investment as part of the plan鈥檚 entire portfolio and monitor the fund performance regularly. Make sure to document these investment decisions and the reasons behind them. It may be helpful to work with an expert to conduct the investment selection and monitoring process or guide you in your decision-making.

5. Evaluate plan fees

When evaluating fees paid by the plan, focus on the value a recordkeeper or other service providers offer instead of focusing solely on the actual cost. As the fiduciary, you must determine whether fees are reasonable in relation to the services provided. An easy way to do that is by reviewing your plan鈥檚 fee disclosure notifications. Overall, you鈥檒l want to understand the fees you have, who鈥檚 paying them, and to whom they鈥檙e paid.

6. Review your process

The Department of Labor (DOL) recommends fiduciaries establish and follow a formal review process for assessing service providers at reasonable intervals, but for large plans, the DOL recommends assessing every three to five years.

Additionally, be sure to evaluate your service provider, reviewing their:

• Overall performance
• Ongoing support, including any reviews or reports they鈥檝e provided
• Actual fees charged, including any notices of upcoming changes to their compensation

7. Protect your plan

Explore how your service provider protects your data by implementing security measures that are suggested by the DOL, such as:

• Multi-factor authentication for participant logins
• Encrypting plan data
• Providing participants with cybersecurity education, including:
  • How to make strong, unique passwords
  • Beware of free wi-fi and phishing
  • Using antivirus software and more

All these steps are essential components of meeting your fiduciary responsibilities鈥攁nd providing a valuable retirement plan to your participants.

Eric O鈥橠onnell is a director of retirement product development for Sentry Insurance. Sentry provides cyber liability, property, casualty, life insurance, and retirement products to dealers and other businesses. Learn more at .

鈥淲orkers have been through a lot over the past two years and it鈥檚 only natural that recent economic and geopolitical turbulence has continued to fuel financial concerns,鈥� said , Head of Schwab Workplace Financial Services. 鈥淲hile plan participants can鈥檛 control inflation or the markets, the good news is they are taking steps to manage their finances with an eye to the future.鈥�

Workers believe they鈥檒l need to save an average of $1.7 million for retirement, down from $1.9 million reported in last year鈥檚 survey, and just under half (47%) feel they are very likely to reach their retirement savings goal. They expect the 401(k) to be their primary financial resource in retirement, providing 37% of income, followed by Social Security (17% of income).

Workers change how they save, spend and invest – In response to rising costs and market volatility, 79% of workers are changing their saving and spending habits, while 44% have altered their 401(k) investments.

Workers are cutting spending by reducing the number of purchases they make (34%), buying cheaper products (32%), and paying off debt more slowly (21%). Despite the belt tightening, workers are still saving less (33%) and spending more in general (30%). They are saving less for emergencies (20%), investing less outside their 401(k)s (18%) and contributing less to their 401(k)s (15%).

Almost one quarter of workers say they plan to retire later as a result of the pandemic. One third of plan participants do not know how long their savings are likely to last in retirement, and the two thirds who offered an estimate say they expect their retirement savings to last 23 years on average.

Nearly half said their company鈥檚 retirement programs (47%) and healthcare benefits (48%) were important reasons they joined their employers, versus just 25% and 32% in 2010, respectively. For results, the consulting firm surveyed 9,600 U.S. employees from large and midsize private companies across a range of industries from December through January.

Amid the Great Resignation, attracting and retaining talent is one of the biggest priorities鈥攁nd concerns鈥攆or HR and company leaders. 

To help, employers are relying on a number of enticements, from bigger pay to flexible work schedules. But pay raises alone might not be enough motivation as inflation is outpacing salary increases at the majority of organizations.
That鈥檚 where more robust benefits come into play.

Although employees say pay is the most compelling reason to stay or leave a company, 鈥渉ealth and retirement benefits have become a much more significant factor in their decision-making process,鈥� says Monica Martin, senior director, retirement, Willis Towers Watson.

In an analysis of the employee benefit priorities, the survey found the most important benefit that employees want their employers to focus on is retirement (44%) followed by flexible work (39%). 

鈥淚n this tight labor market, organizations that understand the importance that employees place on these core benefits and that provide highly-valued benefit programs can differentiate themselves in their effort to become an employer of choice,鈥� Martin says.

Source: HRExeutive.com