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Review 401(k) Plans before Year End

Marianne Reidy, CPA 09.08.2014 | Practice Made Perfect

With the end of the year approaching, it’s an ideal moment to review your 401(k) plans, implement any required changes, and focus on ways to keep costs down.  Plan sponsors have a fiduciary duty to safeguard employees’ retirement accounts and a periodic review of your plans is a vital, required, and revealing exercise.

This is the time to benchmark all service providers, investments, and plan costs. Service providers should be monitored through an RFP process — ideally every three to five years — to ensure that the services received and fees paid are reasonable and meet the needs of the plan.  You may find that the plan fees are not appropriate for the size of the plan’s assets.  

Obtaining an independent review of the proper allocation of investment options for the employees as well as fees can be very valuable and imperative to comply with your fiduciary duties.  JoanAnn Natola, Co-Managing Partner of Element Financial Group notes, “Plan investment options should be benchmarked at least on an annual basis against performance, overall objectives, and the goals of the plan as outlined in the Investment Policy Statements.”  Natola adds that options that are not meeting those standards should be removed.  “The Department of Labor (DOL) has made it clear that plan investment operations will not be evaluated by performance results, but by the processes they employ in achieving those results,” says Natola.

A rebounding economy can impact your plan in a number of ways.  If the firm hired new employees during the year, determine the number of participant’s changes that were made.  You may find that the plan is required to be audited if it has reached certain thresholds — even if that threshold is exceeded by one participant. Also, if the firm decides to match employee contributions, you will need to gauge if the match is in compliance with the plan document. You may have to satisfy a number of questions.  Does the match have to be funded monthly or annually at the end of the year? Have employees been properly notified of the employer match?

It is prudent to make sure that you know where all records are stored.   Should the DOL need to review any of your records, you want to be positioned to find them easily and promptly.  For the sake of security and efficiency, more than one responsible person should know where the records are maintained.

Questions? Contact your Berdon advisor or Marianne Reidy at 212.331.7449 |

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