The little green Jedi master once said: “do or do not – there is no try”. These wise words are as real for running your 401(k) plan as they are to training a Jedi.
401(k) plans are a great benefit offered by companies of many sizes. And, good news, many tasks involved in running a plan can be outsourced to plan vendors.
To be clear, however, there is still a certain level of basic day-to-day execution that a company must handle itself – that cannot be outsourced. In Yoda’s philosophy, if you aren’t committed to do these things correctly, well, perhaps you should give second thought to offering a 401(k).
The “blocking & tackling” involved in running a 401(k) is not rocket science. Slippage usually comes down to lack of company awareness, or the assigned executors of tasks are simply overloaded, or perhaps they do not view running the 401(k) as part of their job, so they never take ownership of it.
Whatever the cause, below is a “six pack” of the most common afflictions that we see in basic plan administration. Yoda would be very much on top of these:
- Remitting contributions in a timely manner: within a week after money is taken out of employees’ paychecks. This should be an integral part of the payroll process.
- Contribution % changes: know how your plan vendor relays this information to you (and recognize that protocol can vary a lot from one vendor to another!) This should also be an integral part of your payroll process.
- Compliance & tax filings: as the end of the plan year approaches, pay extra attention to correspondence from your plan vendor requesting data. They’ll do the hard part of the filing preparation, but they can’t do so unless you provide them with the data that they need!
- Governmental participant notifications: pay extra attention in the fourth quarter to correspondence from administrative vendors. Budget time to understand which notices are required, who creates them, and whatever action YOU need to take.
- New hire procedures: enter data into the 401(k) recordkeeping system as an integral part of the standard new hire “checklist”. Vendors cannot track eligibility for employees they do not know exist!
- Employee termination protocol: companies need to update employee status in their 401(k) vendor systems as part of the standard “checklist” for employee termination.
Author: Ben Hall, ChFC, AIF®
VP & Managing Director – JKJ Retirement Services
Securities and investment advisory services offered through M Holdings Securities, Inc., a Registered Broker/Dealer and Investment Advisor, Member FINRA/SIPC. JKJ Companies are independently owned and operated.