Business Owners: Do You Know the Health of your 401(k)

As a business owner, offering a 401(k) plan is not only a valuable benefit to your employees but also a strategic investment in the long-term success and stability of your company. However, ensuring that your 401(k) plan remains robust and competitive requires regular attention. Conducting an annual review of your company’s 401(k) plan is vital for several reasons and can significantly impact both your business and your employees’ financial well-being.

1. Enhancing Employee Satisfaction and Retention

A well-managed 401(k) plan is a powerful tool for attracting and retaining top talent. By reviewing the health of your 401(k) plan annually, you can ensure it meets the evolving needs and expectations of your workforce. This includes evaluating the plan’s investment options, fees, and employer match contributions. Keeping your 401(k) plan competitive and appealing can lead to higher employee satisfaction and loyalty, ultimately reducing turnover and recruitment costs.

2. Ensuring Compliance and Fiduciary Responsibility

As a plan sponsor, you have a fiduciary responsibility to act in the best interests of your employees. Regularly reviewing your 401(k) plan helps ensure compliance with the latest regulatory requirements and industry standards. This includes checking for updates from the IRS, Department of Labor, and other regulatory bodies. Staying compliant not only protects your employees but also shields your business from potential legal issues and penalties.

3. Optimizing Plan Performance and Investment Options

The financial markets are dynamic, and the performance of your 401(k) plan’s investment options can vary over time. By conducting an annual review, you can assess the performance of the plan’s funds and make necessary adjustments. This may involve adding new investment options, removing underperforming ones, or rebalancing the portfolio. Ensuring that your employees have access to a diverse and well-performing array of investments can enhance their retirement outcomes and reflect positively on your company.

4. Managing Plan Costs and Fees

High administrative and investment fees can erode the returns of your employees’ retirement savings. An annual review allows you to scrutinize these costs and negotiate better terms with service providers if necessary. Reducing fees can significantly improve the net returns for your employees, making your 401(k) plan more attractive and effective. Transparent management of fees demonstrates your commitment to maximizing the value of the benefits you offer.

5. Adapting to Business and Workforce Changes

As your business grows and evolves, so too should your 401(k) plan. Whether you are expanding your workforce, entering new markets, or facing economic challenges, an annual review ensures your plan adapts to these changes. This flexibility helps maintain the plan’s relevance and effectiveness, aligning it with your company’s strategic goals and the financial needs of your employees.

6. Promoting Financial Wellness

A robust 401(k) plan is a cornerstone of your employees’ financial wellness. By reviewing the plan annually, you can introduce features and resources that promote better financial literacy and planning. This might include financial education workshops, retirement planning tools, and personalized advice. Supporting your employees’ financial health can lead to a more engaged, productive, and financially secure workforce, benefiting your business as a whole.

We believe an annual review of your company’s 401(k) plan is a critical practice that supports compliance, performance, cost management, and employee satisfaction. By committing to this regular evaluation, you can ensure that your 401(k) plan remains a valuable asset for both your employees and your business, fostering a stable and prosperous future for all stakeholders. Please let us know if you would like some resources or help doing an annual “check up” on your plans health.