We live in a litigious world. And, unfortunately, 401(k) plan sponsors are a ready target for litigation when benefit plans don’t measure up to expectations. Proper plan administration gives clarity to plans and can help avoid litigation. Here are a few prudent procedures:
- Establish a plan administrative committee – Make sure that all members of the committee are familiar with the plan documents. Established regularly scheduled meetings and keep records of the discussion.
- Appoint fiduciaries to monitor the plan – You’ll need appointing fiduciaries as well as plan fiduciaries. Those who appoint members should not manage the plan, and all members need to be covered by ERISA fiduciary liability insurance. Provide training to fiduciaries, especially when there are changes in ERISA laws.
- Review plan performance as well as the performance of the fiduciaries – At least annually, review investment policies and agreements with outside fiduciaries. Consider hiring an outside investment consultant periodically.
- Stay on top of plan-related fees – Get full disclosure from all vendors and communicate fees to employees.
A well run plan has a positive impact on your company, employees and you both now and in the future. And, a well-run plan is easier to audit, saving your company money in audit fees.