Do’s and Don’ts for Managing a 401(k) Plan

July 27, 2016
2 min read
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Successfully administering a 401(k) plan is challenging. Those that do it well often have investment and compliance experts to lean on. Many companies offer a 401(k) in their benefits lineup to attract and retain employees, but most HR and Finance teams are left to administer the plan on their own. To get the most out of the 401(k) without adding work to your plate, follow these do’s and don’ts.

Do ask your 401(k) provider to integrate with your payroll.

Say good-bye to manually updating payroll files every time an employee makes a change to their 401(k) plan. This also means getting company match and/or Safe Harbor contributions automatically calculated for you. And that data connection also allows you to delegate the other administrative and compliance work that you take on, including: on-time employee deferrals, calculating profit-sharing and 401(k) match vesting periods. Which brings us to the next point.

Do hire a fiduciary for your 401(k) plan.

That includes a fiduciary that selects and monitors the investments in your plan (also known as a 3(38) fiduciary). But take the extra step to protect yourself and the company by hiring a 401(k) provider that also takes on the compliance and administrative responsibilities (also known as a 3(16) fiduciary). By hiring a 3(38) and 3(16) fiduciary, you’ll now be able to delegate tasks like reviewing every loan, hardship withdrawal, and QDRO. Bottom line: make your 401(k) provider (not you) liable to make sure the entire plan was administered correctly. And everything that’s done should be documented automatically in a secure place available online.

Don’t manually track employee eligibility.

Mistakes around employee eligibility is one of the most common compliance errors auditors find in 401(k) plans. Imagine tracking the date of hire and hours worked for each new employee, and then following all IRS requirements to properly notify each newly eligible employee ahead of their enrollment date. If you’re still doing this 401(k) administration manually, then immediately get on the phone with your 401(k) provider and kick off the process of payroll integration. By automating this crucial administrative element, you can avoid the risk of not enrolling employees once they’re eligible and making up any missed contributions as well as any lost earnings on those contributions. And, if an ineligible employee is enrolled, you can also avoid the situation of having to return contributions back to the employee and correcting this on their W-2.


A 401(k) plan is an incredible way to invest in your employees and leverage your benefits to attract top talent, but it shouldn’t come at the cost of your time and taking on additional risk. Your goal is to find a low-maintenance, sustainable way to administer the plan. Try to find ways for your current 401(k) provider to take on more of the work (and liability), so less work and room for error stays on your plate.

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David Ramirez - CEO at ForUsAll
Esther Kim

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This material has been prepared for informational and educational purposes only and should not be construed as a recommendation by ForUsAll, Inc., its affiliates or employees (collectively, “ForUsAll”)  to activate a cryptocurrency window or invest in crypto.  Investing in crypto can be risky and investors must be able to afford to lose their entire investment.  You should consult with your own advisers before activating a cryptocurrency window or investing in crypto.  ForUsAll does not provide legal, tax, or accounting advice. Please refer to your Plan's fee disclosure for more details.© 2023 ForUsAll, Inc. All rights reserved.
1 Schwab 2022 401(k) Participant Study - Gen Z/Millenial Focus, October 2022.
2 As of 12/31/2022. Employees include both current employees and terminated participants with a balance.
3 "Morgan Stanley At Work: The Value of a Financial Advisor" Morgan Stanley, March 2022.
4 Sarah Britton was a client when she provided this testimonial through an independent third party review website. She received no compensation for her remarks. There are no known conflicts of interest in the provision of her comments related to the services provided.