BlogsWhy 401(k) Plan Monitoring is Crucial
July 15, 2015, by Matt Hanson
Why 401(k) Plan Monitoring is Crucial
As an employer, it is gratifying to provide your employees with a safe and secure future. This can come in the form of a variety of benefits, but arguably one of the most important is providing a solid 401(k) plan. It will provide employees with a future for both them and their beneficiaries when the time comes to retire.
However, setting up a 401(k) is not as easy as just snapping fingers. It comes with a certain fiduciary responsibility on the side of the employer. In order to meet the responsibility, employers need to understand a specific set of rules set by the Employee Retirement Income Security Act (ERISA).
As of May 18, the responsibility of the employers has become more important than ever. The United States Supreme Court just ruled that the employers’ responsibility extends beyond simply setting up the account. The 401(k) plans must be actively monitored instead of placed on autopilot. Employers now are responsible for making sure no high management fees or investment options have been implemented in the plans that are considered imprudent.
So what are some of the ways an employer can ensure their employees’ 401(k) plans are staying up-to-date?
- Don’t lose sight of the fact that a 401(k) is meant to meet the needs of the employee. These needs may change over time, so an annual meeting to go over the 401(k) plan with employees is a smart idea.
- Disclose all fees. This means service provider fees, participant fees, and everything in between. Make sure the employee understands and agrees to each of their charges.
- Plan ahead. Plan for reviews annually, plan fiduciaries, and plan all communication with the employee. With all the planning, the employee will never be in the dark about the current status of their own 401(k).
With the recent ruling, it is imperative that all employers know how to properly monitor their 401(k) plans. Providing these plans demonstrates that you value your employees, so ensuring the parameters remain fair will result in happy employees. If you have any questions about different ways to monitor these plans, give Centennial a call today.