Great 401(k) Participant Features That Can Cause You Headaches

A 401(k) plan is one of the great employee benefits. Within a 401(k) Plan, some options are truly beneficial to plan participants when it comes to increasing retirement savings or allowing access for a participant’s benefit. The problem with these options is that if you and/or your plan provider keep your eye off the ball, then there may be a compliance headache coming your way. The road to hell is paved with good intentions and certainly when 401(k) plan features that benefit employees cause compliance grief.

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Bells And Whistles That You Can Add To Your 401(k) Plan At Almost No Cost
Sometimes you can just rejuvenate something without having to replace it. A nice new tie can breathe life into an older suit. Instead of new kitchen cabinets, resurfacing is an option. Sanding and staining can add luster to a dull hardwood floor. So instead of needlessly spending money, you can rehabilitate what you already have. This article is about how plan sponsors can improve their 401(k) plan without spending a lot of money.

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Blunders That Can Cost A 401(k) Plan Sponsor
A blunder is a stupid and careless mistake. History is filled with well-known blunders, such as Excite not buying Google and Blockbuster Video not buying Netflix. In 1962, record label Decca was looking to sign an up-and-coming band. They auditioned two young bands at their studios in London, deciding to sign Brian Poole and the Tremeloes. The band they rejected? You might have heard of The Beatles. Blunders you make as a plan sponsor won’t make the history books, they will just cause you headaches and possibly cause you financial harm. This article is all about the blunders to avoid now as a 401(k) plan sponsor.

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It doesn't mean anything until it's law.
I have a limited amount of time as a solo practitioner plus I’m a stay-at-home since I have the home office.

I don’t have time to do writeups of legislation that aren’t law because I take almost no interest on what the law might be and it’s irrelevant to my clients if it doesn’t become law. So while I do follow what the SECURE Act 2.0 looks like, I’m not going to analyze it thoroughly until it’s the law.

The Great Resignation will lead to greater missing participants
There is a reason I stopped working for people, so I understand the Great Resignation and people’s disgust with working with others, and that was way before COVID.

One of the major problems with the great resignation is going to be former participants that wild decide to keep money in their plan, which invariably leads to missing participants.

So that’s why I think it’s necessary to implement a missing participant program to ensure that people are located and contacted about their account balance.
You’re going to have to review the automatic rollover provider
While the Department of Labor (DOL) has been focusing on missing participants, expect them to question plan sponsors about missing participants and the automatic rollover provider that they use. Why? Because I was asked that question for a plan sponsor on an audit and I assure you, saying to pick the automatic rollover provider just because the third party administrator (TPA) you use, uses them isn’t a valid reason.
I think in the future, plan sponsors are going to have to review their automatic rollover provider, how they were hired, and what fees they collect. In addition, I think DOL may look at the stable value product that these rollover funds are in, and raise concerns on how little these missing participant account holders are collecting in this fund.