The Mid-2022 401(k) Plan Sponsor Update
Time goes so quickly and a 401(k) plan sponsor can’t let it slip away without being on top of things. Before we blinked, it was already summer. One of the problems with being a plan sponsor is that the law, regulations, and news concerning 401(k) plans constantly change and you need to be aware of it. So without further ado, here are some of the important issues impacting 401(k) plans in Mid-Year 2022.

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How to Choose Your Retirement Plan Providers
Too often, retirement plan providers are selected at the family dinner table, the golf outing, or at a house of worship. While those are nice places for social gatherings, they are not the ideal place for selecting retirement plan providers. Selecting competent plan providers is part of your fiduciary duty as a plan sponsor. So selecting a provider must be through an actual process where you review potential providers in each area (administration, financial advisory, ERISA attorney, and auditors (if needed)) before selecting one and documenting the entire method of selection. So this article is about what you should consider in selecting a retirement plan provider.


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Hiring The Two Top Payroll Providers As Your 401(k) TPA Is A Big Mistake
As a plan sponsor, hiring one of the two biggest national payroll providers as your 401(k) plan’s third-party administrator (TPA) sounds like a great idea, except it really isn’t. As an ERISA attorney who does quite well in practice in fixing errors for plan sponsors who fired these payroll providers, I can assure you that you should forget about hiring ADP or Paychex as your 401(k) TPA.

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Don't allow crypto in your 401(k) plan.
In the movie Casino, Robert DeNiro as Sam Rothstein wanted to take on the Nevada Gaming Board after they denied his request for his license. Andy Stone, a Teamster controlled by the Mafia and played by Alan King told him it was a bad idea: “The old man said, ‘Maybe your friend should give in.’ And when the old man says ‘maybe’, that’s like a papal bull. Not only should you quit, you should run!”

I’m telling you that if you have a 401(k) plan, don’t allow crypto investing, just because the Department of Labor (DOL) is saying you should be cautious and are looking at plans that offer it.

The DOL has published compliance assistance for 401(k) plan fiduciaries that are considering plan investments in cryptocurrencies, and it sounds like a warning.

The department’s Employee Benefits Security Administration (EBSA), published Compliance Assistance Release No. 2022-01 cautioning plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.
The guidance states that the DOL has “serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies” or other products whose value is tied to cryptocurrencies.

EBSA says it expects to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products, and to take appropriate action to protect the interests of plan participants and beneficiaries with respect to these investments. What does this mean? Until crypto is regulated and DOL offers guidance that it’s OK, don’t do it.
Make things easier, match at the end of the year
I served almost 10 years as an ERISA attorney for two third-party administration (TPAs) firms. A good chunk of my time was putting out fires, caused by my untrained plan administrators. So unlike some ERISA attorneys who know no life outside a law firm setting, I have a special understanding of what goes on with plan provisions and how they may be messed up.

I stress the concept of keeping it simple, stupid. I like provisions that are less likely to be screwed up. One area is the match. While I understand the desire of plan sponsors to match employee deferrals on a payroll period basis, I prefer that contributions are made at year-end. The more times the employer contributes, the more likely there is an error in the calculation and allocation. When it comes to plan administration, fewer acts by the plan sponsor and the TPA is more. In addition, how many plan sponsors were in trouble when they matched on a payroll period basis and no longer had the funds to fund them during the initial COVID outbreak.

A year-end match that is discretionary creates flexibility and fewer chances of the allocation getting screwed up.
Survey says: People are going to be leery of government run plans
We can certainly our disagreements politically, but I always believe that when given a choice people don’t want to deal with a government-run retirement offering.

So when it comes to mandated IRA programs by states for employers that don’t offer a retirement plan, I believe that pooled employer plans (PEPs) are the option for employers that have to offer a retirement plan or a stated mandated IRA program.

The American Views on Defined Contribution Plan Savings study shows that 75% of Americans have a favorable impression of 401(k) and similar retirement plan accounts, which probably means they would have less of a preference for those plans mandated by the government.