Blog Series: Year-End Checklist for 401(k) Plan Sponsors
Introduction: As a 401(k) plan sponsor, your responsibilities are critical to ensuring your plan remains compliant, cost-effective, and aligned with the needs of your employees.
The fourth quarter is the perfect time to review and finalize year-end tasks so your plan is well-prepared for the coming year.
In this four-part blog series, I’ll guide you through key tasks to help ensure your 401(k) plan closes out 2024 on solid ground.
Let’s break down these tasks so they’re easy to understand and actionable.
Blog 1: Annual Plan Review – Is Your 401(k) Plan in Shape for 2025?
As a plan sponsor, it’s essential to review your 401(k) plan regularly to make sure it continues to serve your employees’ best interests and remains compliant with regulations.
While some aspects of plan management might seem routine, an annual plan review can catch areas that need improvement, and fourth-quarter reviews are a great way to set your plan up for success in the new year.
Key Areas to Focus On:
Compliance Check
- Why it matters: Staying compliant with IRS and DOL regulations is non-negotiable. Non-compliance can lead to hefty fines and penalties.
This is the time to check if you’ve fulfilled the necessary requirements, including nondiscrimination testing, timely participant notifications, and plan eligibility rules. - Action step: Make sure you’re compliant with the latest updates, such as contribution limits or changes in regulations.
If you’re unsure, it’s a good idea to engage your plan advisor to ensure everything is in order before year-end.
- Why it matters: Staying compliant with IRS and DOL regulations is non-negotiable. Non-compliance can lead to hefty fines and penalties.
Plan Design Review
- Why it matters: A plan that worked well for your company when it was first set up might not be the best fit today.
Have there been changes in your workforce, or are there new features in the retirement plan industry that might benefit your employees? - Action step: Review your plan design.
For example, would adding automatic enrollment increase participation?
How about offering a Roth 401(k) option?
These small but impactful changes can help employees save more efficiently.
- Why it matters: A plan that worked well for your company when it was first set up might not be the best fit today.
Document Updates
- Why it matters: Plan documents are your official record of how your plan operates.
Any updates or amendments must be properly documented and available for review if audited. - Action step: If any plan amendments were made during the year (such as adding or removing plan features), make sure they are reflected in your documents.
These should also be communicated to your employees well in advance of any changes taking effect.
- Why it matters: Plan documents are your official record of how your plan operates.
Final Thoughts:
An annual plan review can prevent future headaches by ensuring your 401(k) plan is compliant, well-structured, and effective.
Want to discuss ways to optimize your plan? I’m here to help you make the right decisions for the upcoming year!