Download the 2023 Safe Harbor Guide
Understand new rules for 2023, benefits of Safe Harbor and strategies to minimize Safe Harbor costs.
Understand new rules for 2023, benefits of Safe Harbor and strategies to minimize Safe Harbor costs.
If you are a new member of the human resources department – or if you are the HR department – you have a lot on your plate.
Between payroll, medical benefits, recruiting, reviewing employee performance, evaluating office policies, or building employee handbooks, you’re probably swamped.
If your company offers a 401(k), you may have even more on your new to-do list.
HR professionals often take on numerous duties relating to the company retirement plan. For example, HR may be charged with:
If your company doesn’t have a 401(k) but is considering adding this important benefit, you may be asked to evaluate various providers, including investment advisors. That is, you could be responsible for determining the investments available to employees as they save for retirement.
If you are involved with the company 401(k) in addition to your regular duties, you should be fitted with a cape, because you’re basically a superhero.
Of course, even superheroes need help. That’s why you should also check out these tips below to help you master your 401(k) duties in your first 90 days.
Generally, this work includes:
All of these a mission-critical tasks that must be completed to keep your plan in compliance. Failure to do so could cost your company a lot of money.
As an HR professional, getting a handle on this information should be a crucial part of your 90 day plan. Find out if the work is getting done, who’s doing it, and how it’s getting done. Make note of which processes are done manually, and how costly mistakes are prevented.
Your 401(k) may have a third party who advises the plan on the fund line-up. If that’s the case you may think that provider has taken on full responsibility for the plan’s investments. But if the employer is responsible for signing off on the investments, then the employer retains liability for those decisions. If this is the case, the provider is probably a 3(21) fiduciary. This is a co-fiduciary role where the advisor makes recommendations and the employer retains fiduciary responsibility. An alternative is to hire a 3(38) fiduciary. In this case you are hiring an advisor who takes on the investment decision making while bearing the investment risk. Find out which kind of fiduciary is handling your plan’s investments.
Has your company benchmarked 401(k) plan fees lately? Plan sponsors must ensure that fees paid for provider services are necessary and reasonable. Comparing your plan’s fees to those of competing providers is essential to making sure participants are not overpaying for 401(k) services. Benchmarking also provides information about the marketplace which can prove valuable when negotiating with providers.
One way to reduce fees in a meaningful way is to cut fund expenses. These typically account for the greatest portion of 401(k) expenses. If your line-up is full of actively managed funds with no low cost passive alternatives, you may want to ask your advisor why that is the case. And if fund expenses include 12b-1 fees, you may have more room than you think to lower costs by switching out funds or providers.
You may have difficulty tying specific services with specific costs. If so, ask your providers for a list of fees. It’s also important to benchmark recordkeeping and other charges. And be sure to determine if there are additional fees for specific services such as loans, distributions, or rollovers.
As an HR expert you are all about employee benefits. But sometimes it’s not so easy to ensure that all employees are getting the maximum benefit from their 401(k). A good start on evaluating employee engagement is to look at the participation rate. If fewer than 80% of eligible employees are enrolled, the plan may be too difficult or confusing to join. See what’s involved in enrolling in the 401(k), and if the investment options are presented in a manner that doesn’t overwhelm inexperienced investors.
Fortunately, certain plan features can improve plan health. These include automatic enrollment and automatic escalation of employee deferrals. Make sure you have a good advisor who will help employees understand not only the investment options, but also the benefits of participating in any company match. Certainly the ability to enroll online or through a mobile device can improve the employee experience. Make sure it’s easy to change investment options and contribution levels. And if employees need to speak directly with an investment professional, does your provider make one available?
Once your review is complete you will understand your company’s responsibilities in administering the 401(k), the costs involved, and the workload required to efficiently administer the plan. If you’d like to outsource more of the day-to-day administration that comes with offering a 401(k), you may want to consider hiring a 3(16) fiduciary to take on these tasks and the associated liability. If such a move would require a change in providers, check out our 401(k) RFP template. You can ask your current provider and any potential providers to complete the RFP. That will give you a detailed look at costs versus services provided. You can also check out our answers at ForUsAll to these same questions.
You probably wear a lot of hats as an HR professional. And if you are ready to retire the hat you wear when you’re knee deep in 401(k) administration and compliance, give us a call. Getting employees to join the plan and save at high rates is the most important thing we do. And we can do this while taking on administrative, compliance, and investment responsibilities. As you learn more about the company 401(k), give us a call to see if we can help.
Understand new rules for 2023, benefits of Safe Harbor and strategies to minimize Safe Harbor costs.
Give your employees more than just a 401(k), join the movement.
