Over the last few months, we have been working with several companies to help them fix their “broken” 401k plans. All of them came to us with operational issues and a 401k plan that felt “messy and broken.”
Here are a few of the issues they were dealing with:
- Their payroll data feed had broken. Because of this, 401k contributions had not been submitted on time for over seven months! This is a big deal with the DOL.
- They failed to file their annual 5500’s for three years in a row. They had questions about how to file but didn’t have the right support, and the filings fell through the cracks.
- They failed annual compliance testing and were required to submit contribution refunds to their highly compensated employees, angering some of their highest-value team members, when simple plan design changes could’ve been implemented to avoid this.
- They had low participation rates and below-average deferral rates.
- Their plan had grown, but they were still paying the same fees that were in place when they started the plan.
These scenarios are common. Employers often come to us when they have significant plan deficiencies that need to be addressed.
Without fail, the issues stem from a few things:
- They chose their provider partners based on cost alone (cheapest is rarely best).
- They failed to conduct a thorough due diligence process for their provider partners.
- They had a lack of knowledge about what they needed and how to find it.
I don’t blame companies for falling into one of these situations. After all, 401k plans are extremely complex. Often, the issue is simply a lack of knowledge and understanding.
One of the best ways to avoid ending up in one of these situations is to partner with the right 401k plan providers. The first step in that process is being able to answer two questions that are often very confusing to 401k plan sponsor companies:
- What providers or partners do I need?
- What do these providers do?
To help clarify things, we’ve put together a one-page document that lists and explains the roles of the three primary providers we believe every company should partner with to create and maintain a healthy, operationally efficient, compliant 401k plan.
You can view that one-page document here.
The beauty of these providers is that they overlap somewhat to create a fabric of fiduciary plan governance and support. Say that three times fast 🙂
In addition, they are independent of each other. If one isn’t performing well, it can be removed and replaced without upending the entire 401k plan.
We hope this information is useful. We’d love to chat with you if you have any questions.