The 45 Minute 401(k) Review For Plan Sponsors

As a business owner, CFO, HR Director you have a million things on your mind. With many pressing needs grasping at your attention, it's no surprise you haven't quite gotten around to completing that long overdue review of your company's retirement plan. You’re busy! I totally get it! To help, we've outlined a few steps that can get you through a review of your plan in as little as 45 minutes.

 At a minimum, retirement plans should be reviewed at least once a year. Why? As a fiduciary, it is your responsibility to make sure your plan meets all federal requirements and is maintained to keep your employees' best interest at the forefront. Failure to do so could result in hefty fines and penalties and leave you open to legal actions by plan participants...Elite Universities Sued Over Retirement Plan Fees

#1 Obtain your plan documents (5 Minutes)

You'll need the most recent version of the following documents:

  • Adoption Agreement
  • Fee Disclosure Statement
  • Investment Line Up

These documents should be readily available through your plan provider or third party advisor.

#2 Know your plan (20 Minutes)

The adoption agreement is the heart and soul of your 401(k) or 403(b) plan. Doing a quick scan and summarizing the provisions will help you identify anything you might want to consider amending. If it has been a while since your plan was established, pay close attention to items such as the type of contributions allowed, company matching formula and vesting schedules. As companies evolve, so to should the aim of its employee benefits. Further, you may find that you are paying additional administrative fees for customized plan provisions that are no longer necessary.

#3 Know your fees (10 Minutes)

One of the most important fiduciary duties you have as a plan sponsor is understanding the costs embedded in your plan. A quick look at the Fee Disclosure Statement and Investment Lineup will give you an idea of what the plan is costing you, the sponsor, as well as individual plan participants. Retirement plan fees are notoriously complicated. They are charged as flat dollar amounts and as a percentage of plan assets. We suggest itemizing plan expenses in a simple schedule that includes the following categories.

  • Record Keeping and Administration
  • Asset Custody
  • Investment/Fund Expense
  • Third Party Advisor

Knowing the sum of all fees will help you benchmark your plan’s costs. Remember that cost efficiency is extremely important in keeping with the best interest of plan participants. 


#4 Know your investment performance (5 Minutes) 

This can be an intimidating process for many plan fiduciaries but a quick glance at the investment line-up report will allow you to accomplish two things, 1) confirm that a diversified list of investment choices in multiple asset classes is being offered, and 2) see which are keeping pace with their performance benchmark. To analyze your plan’s investment performance, compare each investment’s long-term (5, 7, 10-year) performance against its stated benchmark. If you highlight investments that are consistently underperforming, it may be time to boot them out of the plan. 

#5 Write it all down (5 minutes)

By this point you've identified important plan amendments that could save your business money, protect you from regulatory risks, and enhance the total benefit to your employees. Put these observations in writing and create a plan with actionable items. Taking an organized, well-written plan to your provider or advisor will significantly help in implementing the necessary changes.

If you do not have an advisor or are interested in obtaining objective feedback regarding your company's current retirement plan, contact rofolio and we'll gladly review it with you at no cost.

Michael Scheel

Profolio Investments Inc, 121 Newark Avenue Ste 544, Jersey City, NJ, 07302