In many industries, offering a 401k for employees is a competitive necessity. If you don’t offer one and a competitor does, it could mean the difference in a job candidate’s decision to accept their offer over yours. It could even send employees heading for the door. Assuming you do offer a 401(k), the challenge then becomes plan maintenance and compliance. Just as you presumably visit your doctor annually for a checkup, you should check your 401k performance at least once a year. This includes reviewing the administrative processes and fiduciary procedures associated with your plan. Let’s look at some important areas of consideration:

Investments

Study your plan’s investment choices to determine whether the selections available to participants are appropriate. Does the lineup offer options along the risk-and-return spectrum for all ages of participants? Are any pre-mixed funds, which are based on age or expected retirement date, appropriate for your employee population?

If the plan includes a default investment for participants who have failed to direct investment contributions, check the option to ensure that it continues to be appropriate. If your company plan doesn’t have a written investment policy in place or doesn’t use an independent outside consultant to assist in selecting and monitoring investments, consider incorporating these into your investment procedures.

Fees

401(k) plan fees often come under criticism in the media and can aggravate employees who follow their accounts closely. Calculate the amount of current participant fees associated with your plan’s investments and benchmark them against industry standards.

Investment Managers

Have you documented in writing the processes your plan has in place for the selection and monitoring of investment managers? If not, doing so in consultation with an attorney is highly advisable. If you have, re-read the documents to ensure they’re still accurate and comprehensive.

Administrator

Another important part when you check you 401k performance is to solicit and monitor participant feedback on the administrator. By doing so you will know about grumblings before they grow into heated complaints. Further, put criteria in place to assess the plan administrator’s performance on an ongoing basis and to benchmark performance against industry standards.

Compliance

Are your plan’s administrative procedures in compliance with current regulations? If you intend your plan to be a participant-directed individual account plan, are all the provisions of ERISA compliance, Section 404(c) being followed? Have there been any major changes to 401(k) regulations over the last year? These are just a few critical questions to ask and answer.

Getting Your 401(k) On The Right Track

A 401(k) is usually among the most valued benefits a business can offer its employees, but you’ve got to keep a close and constant eye on its details. We’d be happy to check your 401k performance, help you assess the costs and other financial details of your company’s plan.