You never know what's lurking in the water.
If you “drained” your 401(k) plan, what would you find?
All too often, in our experience, there are nasty surprises hidden just below the surface. Some are glaringly obvious while others are more covert – but equally damaging. The key is knowing where to look.
Here are the top 5 problems we find when reviewing 401(k) plans.
1. Lack of documentationSponsoring a 401(k) plan is a big responsibility. It should not be taken lightly. The Department of Labor and the Internal Revenue Service can audit your plan at any time. They can assess penalties if problems are found. Participants can sue you for being asleep at the wheel, too. Employers often fail to shield themselves from these risks. The best protection is robust documentation. If you don’t have a 401(k) committee, if you don’t prepare and archive meeting minutes, or if you don’t review your plan on a routine basis, your liability for a lawsuit or penalty has increased significantly.
3. Poor plan designThis issue covers a wide range of potential problems. We’ve seen a lot – key employees unable to maximize savings, plans without a Roth contribution option, complex plan designs when a simpler and less burdensome design would do the trick, and unnecessary delays in getting employees into the plan. The wrong plan design can be extremely costly for you and your employees. Here’s the unfortunate part: Whether your plan design is subpar or spot-on, your provider charges you the same. It pays to have the right design in place, and a second opinion never hurts.
2. High feesFees in a 401(k) plan are like a Where’s Waldo® picture. You know they are there, but you can’t always find them. Each dollar your plan provider takes as a fee is a dollar you don’t have in your account helping prepare you for retirement. If you haven’t benchmarked your fees in the last three years, now is the time. If you are being overcharged, you have an opportunity to save your retirement by switching providers or negotiating lower fees with your current provider.
5. Inferior serviceThe four problems mentioned above can be made worse by plan providers that offer substandard service. Not only are those providers generating fees without providing sufficient value in return, they increase your risk for lawsuits and penalties. If you are not working with a provider that helps you meet your fiduciary obligations or that doesn’t regularly meet with your employees one-on-one to ensure they are on track for a successful retirement, it’s time to explore a provider that offers more bang for your buck.
4. Underperforming investmentsYour 401(k) account is only as good as the investment funds in it. Investment returns are a key driver to successfully preparing for retirement. Research has proven that high-cost funds are a drag on long-term performance. That’s why it is critical that you and your employees have access to high-quality investment funds that do not carry hefty price tags. This is one area where you actually get what you don’t pay for.
Fortunately, all five of these hidden problems can be uncovered through Invisor’s free 401(k) review. There are only four pieces of information we need for the review, and they will take you less than 15 minutes to collect. We take it from there.
There is no obligation to work with us after we provide your 401(k) review, and you will get a tremendous amount of valuable information at no charge. Just consider it our contribution to helping you meet your responsibilities as a plan sponsor.
When was the last time you drained the water from your 401(k) plan? Isn’t it about time you did?
You might be surprised by what’s hiding just below the surface.