5 Retirement Plan Mistakes to Avoid
Choosing to sponsor a retirement plan can help fortify employee recruitment and retention efforts, but comes with responsibility. By offering this benefit, you make a commitment to administering a compliant plan, managing changing regulations and selecting appropriate investments. That can be tough – especially while focusing on your organization’s overall mission and goals. Avoiding these five retirement plan mistakes can help you fulfill your duties as a fiduciary.
1. Not operating your retirement plan according to your plan document
The Employee Retirement Income Security Act (ERISA) requires that every retirement plan be established and maintained by a written document. You have options for creating your plan document, including pre-approved documents developed by a retirement plan provider or individually designing a document specific to your plan with assistance from an attorney. Regardless of which avenue you choose, it is imperative that your retirement plan is in compliance with current regulations and that you operate your plan according to your plan document.
Does your plan document meet industry standards? Download a handy sample here.
2. Missing important deadlines
All retirement plans have deadlines – and it’s your responsibility as a plan fiduciary to meet them. To make sure that your plan complies with pertinent federal and local regulations, you’ll need to keep track of your organization’s required filings, due dates and other administrative activities so you can avoid costly fines and other penalties. Create a compliance calendar to map out the important dates relevant to your organization. Consider setting email or calendar reminders throughout the year to keep you on track to meet your various deadlines.
Have you set your reminders? Check out key testing and filing dates in our guide.
3. Paying an unreasonable amount for your plan
Your retirement plan is designed to help your plan participants achieve their retirement goals, but this benefit should be offered at a reasonable price. ERISA does not clearly define “reasonable”, but many interpret this as a balance of the plan’s offerings with fees that seem appropriate when compared with the market. Benchmarking your retirement plan can help you determine if it aligns with other employers in your space and whether your plan’s fees are reasonable. It can also illuminate the potential features that your retirement plan might not currently include but that your participants may benefit from if added in the future.
Are you on target? Identify your plan’s strengths and weaknesses with our guide.
4. Assuming your employees know the what, why and how of investing
By sponsoring a retirement plan, you’ve made a commitment to the financial wellbeing of your employees and their goals for retirement. Simply offering a plan may not be enough to get them on track if they don’t fully understand what options are available to them, why they should participate and how they can get started. Participant education can help your employees understand the best ways to utilize their retirement plan and as a result help them gain increased confidence in the plan decisions they make. When they’re on track to retire, your organization can benefit from decreased time paying out salaries and other benefits for these employees. This can have substantial positive impact on your bottom line.
Are your employees on track to retire? Check out this guide to find out.
5. Going at it alone
Developing a prudent process to properly manage your plan can be intimidating, but it isn’t as difficult as it may seem. Enlisting the help of a qualified retirement plan service provider is a great place to start. Plan sponsors typically work with three main providers to assist with various aspects of their responsibilities as a plan fiduciary:
- Investment Advisor – makes investment recommendations and/or analyzes the plan
- Recordkeeper – often the custodian for a plan’s assets and/or the investment platform provider
- Third Party Administrator (TPA) – assists with the day-to-day operations and administrative aspects of a plan
What support is right for you? Learn more about service providers in this guide.
Sponsoring a retirement plan is never simple. However, armed with the right knowledge, your responsibilities as a plan sponsor can be fulfilled much more efficiently and effectively. If you have any questions, please contact a retirement plan professional here.