401k problems and difficulties frequently occur. If you have a specific 401k problem and need some suggestions or guidance, email us or call us at 718-793-9885. Some common 401k problems and generals solutions are discussed below.
The initial design of a 401k plan often does not address all employer needs. More frequently, a review of plan design by the organization servicing the plan is not regularly performed. Changes in employer needs, new governmental regulations and improved design techniques necessitate reviews of the basic plan features of eligibility, employer contributions and vesting, among others. If this is not done by the plan's service provider, using a 401k design specialist every few years for this purpose should be considered.
Although most 401k administrative services are supplied by the service provider, the employer must furnish employee data and should review the provider's administrative work. Employers must also sometimes preform some administrative tasks, since all administrative tasks are not performed by many service providers. An independent 401k consultant should perform a brief review every few years to prevent and detect 401k problems and to help avoid any penalties that may be incurred. 401k administrative errors and mistakes are not uncommon Any problems uncovered should be fixed under corrections programs established by the I.R.S and D.O.L, with guidance from the service provider.
Low employee participation can be improved by a greater 401k promotion effort and improvements in plan design. All promotion methods (e.g., meetings, printed materials, internet, etc.) should be explored. Targeted plan promotions can be especially helpful. Since many service providers offer limited support with 401k promotion; using the expertise of a 401k promotion specialist may be advisable.
Many service providers are not heavily involved in the investment function and many that are frequently charge high fees for these services. Often, employers make little or no effort in selecting and monitoring 401k investments. This lack of attention to plan investments can result in inadequate 401k fiduciary protection for the employer. Investment fees, especially on small plans, are frequently too high or difficult to determine. A strong and aggressive 401k strategy should be pursued by the employer to determine and reduce these fees. The feasibility of switching to a new service provider should always be assessed.