6 Common Administrative Tasks That Can Morph Into 401(k) Plan Headaches

Managing a 401(k) plan can leave even the most seasoned administrators feeling overwhelmed. With proper support, you can simplify the complex task of retirement plan management.

Top 401(k) Plan Headaches

The first step is to understand the potential problems. Here are some common issues that can cause headaches for plan sponsors:

• Uploading Payroll

• Determining Eligibility

• Over-Contributions

• Investment Changes

• Distributing Notices

• Regulatory and Legislative Updates

Navigating the labyrinth of retirement plan management can seem like a daunting challenge for any plan sponsor, employer or 401(k) plan administrator. The various administrative tasks, ranging from uploading payroll to handling investment changes, can often turn into 401(k) plan headaches.

1. Uploading Payroll

A seemingly straightforward process can quickly turn into a minefield of errors. Incorrect data entry could lead to improper contributions, which could potentially result in legal and financial complications. One area of particular focus is the plan’s definition of compensation. When a special payroll cycle includes different types of compensation such as bonuses, commissions, or overtime, it’s important to know whether that compensation should be included or excluded from the 401(k) plan.

2. Determining Eligibility

When an employee may enter your 401(k) plan is different for each employer. Common eligibility requirements include 21 years old and 1,000 hours of service. Then the employee is eligible to enter the plan on the next entry date: for example, January 1st and July 1st.

However, effective January 1st, 2024, there are new eligibility rules for long-term, part-time employees. Under the SECURE Act, employees that have worked 500 hours for three consecutive years are eligible to participate in the 401(k) plan on January 1st, 2024.

3. Over-Contribution Quandary

An employee might max out their savings, then end up getting money back due to annual contribution limits. This creates extra administrative work and potential confusion for both parties. Get ahead of this now by running a report to learn if any employees are close to – or have - maxed out their 401(k) plan.

4. Investment Changes

Moving from one investment option to another can be a complex process, requiring professional guidance from a 3(21) or 3(38) investment fiduciary. Plan sponsors should work with a 401(k) advisor, like Gasaway, to evaluate watch list funds and then implement recommendations based on your plan’s Investment Policy Statement. Additionally, it’s critical to communicate these changes to plan participants.

5. Distributing Notices

Ensuring that all employees receive timely and accurate information about their 401(k) plan can be a daunting task, especially for large companies. One idea is to work with your recordkeeper and instruct them to send out notices. Another idea is to hire a 3(16) plan administrator who will send out and track required plan notices.

6. Regulatory and Legislative Updates

Staying informed and compliant with the ever-changing landscape of retirement plan regulations is a significant challenge. For example, the SECURE Acts are two long and lengthy pieces of legislation that greatly impact 401(k) plans.

401(k) Plan Headache Relief

This is where we can give a helping hand in the following key areas:

• third party administrator (TPA) communication

• recordkeeper collaboration

• investment strategy

• plan design support

• employee education

• fiduciary and regulatory guidance

While the role of managing a 401(k) plan can be fraught with potential pitfalls and headaches, the support of a specialized retirement plan advisor can significantly lighten the load. We can help streamline processes, establish compliance best practices, educate employees and foster an efficient retirement plan.

The Gasaway Team

7110 Stadium Drive

Kalamazoo, MI 49009 (269) 324-0080 FAX (269) 324-3834

This presentation is not an offer or a solicitation to buy or sell securities. The material discussed is meant to provide general education information only and it is not to be construed as specific investment, tax or legal advice and does not give investment recommendations.

Certain risks exist with any type of investment and should be considered carefully before making any investment decisions. Keep in mind that current and historical facts may not be indicative of future results.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website, https://adviserinfo.sec.gov/firm/summary/123807.

This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.

©401(k) Marketing, LLC. All rights reserved. Proprietary and confidential. Do not copy or distribute outside original intent.