Regulatory requirements are one of the main issues that cause employers to hesitate in their decision to offer a 401(k) plan to their employees. Hiring the right team to manage your plan can make those requirements streamlined and stress-free, and that team begins with your 401(k) record keeper.

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Choosing the right record keeper is a critical decision that can significantly impact the administration and efficiency of your company's retirement plan. The record keeper is responsible for managing participant records, processing contributions, and ensuring compliance with regulatory requirements.

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We have identified 8 common mistakes that employers make in their search for a 401(k) record keeper to assist in the administration of their retirement plan. Avoiding these mistakes when hiring a record keeper is essential to ensure the smooth operation and success of your retirement plan, so let’s go through the common mistakes that employers should avoid: 

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Not Evaluating Record Keeper Experience and Expertise 

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One of the most significant mistakes is not thoroughly evaluating the experience and expertise of potential 401(k) record keepers. Each record keeper may have different strengths, specialties, or levels of experience, especially with various plan sizes. It's essential to assess their track record in managing plans similar to yours, their technological capabilities, and their understanding of the specific regulatory landscape that applies to your retirement plan. 

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Failing to Review Service Offerings 

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401(k) record keepers may offer a wide range of services, from basic recordkeeping to more comprehensive plan administration and participant support. It's crucial to review and understand the scope of services provided by each record keeper and assess whether they align with your company's needs and those of your plan participants. Opting for a record keeper that offers the right level of services can lead to a more efficient and effective retirement plan. 

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Overlooking Data Security and Privacy Measures 

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Handling sensitive participant information is a significant responsibility of the record keeper, and has become extremely important as data breaches become more commonplace. It's essential to ensure that the record keeper has robust data security and privacy measures in place to safeguard the personal and financial information of your plan participants. Ask about their security protocols, encryption practices, and adherence to industry standards to protect your participants' data from potential breaches. 

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Ignoring Plan Participant Experience 

The quality of the participant experience is crucial in promoting engagement and participation in your 401(k) plan. A record keeper's online platform and participant portal should be user-friendly, intuitive, and easily accessible. Participants should be able to view and manage their accounts, make investment changes, and access educational resources or tax documents with ease. Neglecting the participant experience can lead to lower plan engagement and hinder employees' ability to save for their retirement effectively. 

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Not Considering Cost-Effectiveness 

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The cost of hiring a 401(k) record keeper can be a significant factor in plan administration. While it's essential to weigh the costs, it's equally important to consider the value provided by the record keeper's services. Look for a record keeper that offers a competitive fee structure while delivering high-quality services, robust technology, and strong participant support. 

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Failing to Review Record Keeper Reputation and Client Satisfaction 

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A record keeper's reputation and client satisfaction are indicative of their performance and commitment to customer service. Research client reviews, testimonials, and independent ratings to gauge the record keeper's reliability and level of customer support. A record keeper with a positive reputation and satisfied clients is more likely to be a reliable and valuable partner for your retirement plan. 

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Disregarding Compliance and Regulatory Expertise 

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401(k) plans are subject to numerous regulations and compliance requirements from a variety of different places (such as the IRS, DOL, and ERISA). This makes it imperative that you select a record keeper with expertise in retirement plan administration and compliance, especially with plans similar to yours. A record keeper that stays up-to-date with changing regulations and ensures accurate and timely filings can help reduce the risk of potential penalties, legal issues, or headaches in the future. 

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Overlooking Reporting and Analysis Capabilities 

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Detailed reporting and data analysis are essential for plan sponsors to assess plan performance and participant engagement. A record keeper with robust reporting capabilities can provide valuable insights into plan participation rates, contribution levels, and investment trends. These insights can help plan sponsors make informed decisions to enhance the plan's effectiveness and overall participant outcomes. 

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The Bottom Line 

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Hiring the right 401(k) recordkeeper for your plan’s unique needs is a vital step in ensuring the success of your retirement plan. Thoroughly evaluate the record keeper's experience, service offerings, data security measures, participant experience, and cost-effectiveness. Additionally, consider their compliance expertise, reputation, and reporting capabilities, especially with plans structured similarly to yours.

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Avoiding these common mistakes listed above can help you to find the best fit for your retirement plan’s custodial needs, and avoid potential headaches or fines in the future. By making an informed decision when selecting a 401(k) record keeper, you can ensure the smooth operation of your retirement plan and provide a valuable benefit for your employees' future financial security. 

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A company 401(k) plan will only offer value if your employees participate, and they will only participate if they believe that it offers value to them. By following our advice above to choose the right plan custodian, you will be well on your way to delivering that value to your employees.

There are many regulatory and other duties that a 401(k) custodian must perform for a retirement plan that they manage. These requirements make hiring the right custodian a crucial decision that can impact the success and effectiveness of your company's retirement plan. A custodian is responsible for holding and safeguarding the plan assets, ensuring compliance with regulations, and providing essential administrative services.

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Each of these makes a 401(k) plan custodian an essential part of the team that works to ensure that your plan is set up to best suit the needs of participants. To help you choose the right one for your plan’s unique needs, this article will cover 8 common mistakes to avoid when hiring a 401(k) plan custodian.

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Not Conducting Adequate Research  

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One of the most significant mistakes made by employers is not conducting thorough research on potential 401(k) custodians. Many simply seek out well-known financial institutions without fully exploring the other options that may be available to them, without even knowing if they will be the best fit.

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Take the time to research and compare multiple custodians, considering factors such as their reputation, experience, service offerings, fees, and client reviews. An informed decision can lead to a more suitable custodian for your plan, especially for a small business that may be low on the priority list for a large financial firm.  

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Failing to Understand Service Offerings  

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401(k) custodians may offer a range of service options, from basic recordkeeping to more comprehensive plan administration and investment management. It's essential to understand the scope of services provided by each custodian and assess whether they align with your company's needs. Choosing a custodian that offers tailored solutions can significantly benefit plan participants and streamline plan management.

Overlooking Fee Structures  

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The fees charged by 401(k) custodians can vary significantly and have a direct impact on the plan's overall costs and participant outcomes. Some custodians may have hidden fees or complex fee structures that can be challenging to understand. Look for transparent and competitive fee arrangements, and ensure you have a clear understanding of all costs involved.  

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If you later find that the custodian you chose has hidden fees that change your cost/benefit analysis, it may be worth your effort to find a new one.

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Ignoring Compliance and Regulatory Requirements  

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401(k) plans are subject to various legal and regulatory requirements, including those set forth by the Internal Revenue Service (IRS), the Department of Labor (DOL), and the Employee Retirement Income Security Act (ERISA). Choosing a custodian that is experienced in retirement plan administration and compliance is critical. Failure to comply with regulations can result in costly penalties and liabilities for your company, even if done at the hands of your custodian. This makes it imperative to do your due diligence and find one who is dependable and has a history of meeting their requirements.

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Not Considering Technology and User Experience  

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A user-friendly and technologically advanced platform can greatly enhance the participant experience and encourage engagement with the retirement plan. Look for a custodian that offers a modern, intuitive, and accessible online interface for both employers and employees. A seamless user experience can lead to increased participation and better plan outcomes.  

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Failing to Review Custodian's Reputation and Track Record  

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A custodian's reputation and track record are indicative of their performance and commitment to client satisfaction. Consider reviewing client testimonials, case studies, and independent ratings to gauge the custodian's reliability and level of service. A custodian with a positive reputation and proven results is more likely to be a trustworthy and valuable partner.  

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You may want to ask potential custodians for the contact information of their current or former clients. If they balk at the suggestion, that may be seen as a red flag that prevents you from getting firsthand testimonials of their performance.

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Overlooking Customer Support and Accessibility  

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Efficient and responsive customer support is essential when managing a retirement plan. Consider how accessible the custodian's support team is and how they handle inquiries and issues. Timely and helpful customer support can resolve problems quickly and ensure a positive experience for both employers and participants.  

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Disregarding Fiduciary Services

Some custodians offer fiduciary services, which means they assume some or all of the fiduciary responsibilities for the plan. Engaging a custodian that acts as a fiduciary can provide an additional layer of protection for plan sponsors, as the custodian will share the responsibility of acting in the best interests of plan participants.  

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The Bottom Line  

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A 401(k) custodian has a major role to play in the administration and regulatory compliance of your plan. Choosing the right one that is the best fit for your plan is an important step in the process of building a plan for your employees, and should not be taken lightly.

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Avoiding the common mistakes outlined above when hiring a 401(k) custodian is essential to establishing a successful and well-managed retirement plan. Conduct thorough research, understand the custodian's services and fee structures, ensure compliance with regulations, and prioritize customer support and user experience. A well-chosen 401(k) custodian can play a vital role in enhancing the retirement readiness of your employees and providing peace of mind for plan sponsors.

Choosing a financial advisor for your 401(k) plan is an important decision, as they are integral to plan administration, performance, and providing competent advice to your plan participants. Advisors bring different levels of experience, specialties, and competency to the table, so hiring a financial advisor should only be done after completing sufficient due diligence to find the right one for your plan.

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This article will help explain how to hire a financial manager for your 401(k) plan by discussing five common mistakes to avoid during your search. To find a holistic financial planner that can put your plan on the right track, follow the advice outlined below.

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1. Hiring an Advisor Who is Not a Fiduciary 

• Not all 401(k) advisors act as fiduciaries, but that distinction can have a significant impact on your plan. A fiduciary is legally bound to act in your best interests, prioritizing your financial well-being over their own. By hiring a fiduciary advisor, you can have peace of mind knowing that their recommendations and actions are aligned with your goals. 
• Non-fiduciary advisors may have conflicts of interest that can compromise the advice they provide. When selecting a 401(k) advisor, always ensure they have a fiduciary duty towards you and your retirement plan. 

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2. Not Asking a Lot of (or the Correct) Questions 

• To make an informed choice, it is essential to ask a lot of questions during the 401(k) advisor selection and hiring process. Don't hesitate to inquire about their qualifications, experience, investment philosophy, and how they approach retirement planning. 
• Ask about their track record and success stories working with clients in similar situations as yours. Inquire about their fee structure and the services they offer. The more questions you ask, the better you can gauge the advisor's expertise, approach, and suitability for your needs. 
• Part of the job of an advisor is sales with a need to grow their own client base. As they are often personable, you may find yourself quickly off track and forgetting questions that you need to ask. Make a list in advance so you can compare answers to the same questions across all advisors that you interview.

3. Hiring the First Advisor You Find 

• It's easy to fall into the trap of hiring the first 401(k) advisor you come across, especially when you're eager to get your retirement planning in motion. This can be a costly mistake, however. Take the time to research and interview multiple advisors to compare their qualifications, services, and fees. 
• By exploring different options, you can get a better sense of the industry landscape, the range of services available, and the expertise different advisors bring to the table. Don't rush the decision-making process when it comes to selecting a 401(k) advisor; it's worth investing time upfront to find the right fit for the needs of your plan. 
• There are many online platforms, including those from the regulatory agencies, that can help you develop a list of potential 401(k) advisors to consider. Make a list, do your background research on those that catch your eye, and schedule in-person consultations with the candidates that appeal to you the most.

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4. Not Knowing the Difference Between Fee-Based and Fee-Only 

• Understanding the different fee structures used by 401(k) advisors is crucial to avoid surprises and potential conflicts of interest. The two most common fee structures are fee-based and fee-only. 
• Fee-based advisors may earn commissions from the financial products they recommend in addition to charging fees for their services. This can create a potential conflict of interest, as they may have an incentive to steer you towards products that generate higher commissions for them. 
• On the other hand, fee-only advisors charge a transparent fee for their services and do not earn commissions from product sales. This fee structure aligns their interests with yours, ensuring they prioritize your financial well-being rather than their own financial gain. 
• Understanding the difference between fee-based and fee-only advisors and choosing one that aligns with your preferences and comfort level can help you avoid potential conflicts and ensure your advisor's recommendations are unbiased. 

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5. Hiring an Advisor Who Only Focuses on One Area of Planning 

• Retirement planning is a comprehensive process that involves various elements, including investment management, tax planning, estate planning, and risk management. Hiring an advisor who only specializes in one area of planning may leave critical aspects of your retirement strategy unaddressed. 
• A well-rounded 401(k) advisor should have expertise in multiple areas of financial planning and be able to offer a holistic approach to retirement planning. They should be knowledgeable about investment strategies, tax implications, and how to optimize your retirement savings within the context of your overall financial situation. 
• By hiring an advisor with a well-rounded skill set, you can ensure that all aspects of your retirement planning are considered, and the financial goals of plan participants are adequately addressed. You will have plan participants across multiple age ranges, and your advisor should be able to properly plan for all of them.  

The Bottom Line 

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Avoiding the common mistakes outlined above when hiring a 401(k) advisor can help you make a more informed decision and enhance the likelihood of developing a high-quality plan for your company’s retirement plan. Remember to seek a fiduciary advisor, ask thorough questions, explore multiple options, understand fee structures, and choose an advisor with a broad range of expertise.

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Taking the time to select the right 401(k) advisor can provide you with the confidence and peace of mind that your retirement planning is in capable hands. A retirement plan can serve to provide many positive benefits to both a company and its employees, but only if the plan is run by a competent advisor and holistic financial planner who sets participants up for success.

A PR and marketing agency that specializes in workforce management recently commissioned a survey to determine how best to recruit and retain top talent and what HR marketing strategies are most effective - especially in the event of economic downturn when market fluctuations are a more significant factor affecting retention.

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The survey collected data across a variety of industries ranging from healthcare and hospitality to retail and construction. Despite the spectrum of work environments studied, however, consistent trends emerged revealing some of the elements that employees consider to be most important when assessing their employment situation, including the security of their position within the company, the clarity of the expectations for work output, the supportiveness of the environment, the friendliness of the culture, and whether or not the employee feels cared about in general. 

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With considerations like company culture, values, and transparency becoming top priorities among employees, recruitment and retention efforts must exist even less exclusively within the purview of human resources functions, and extend further into the realms of marketing and public relations. The companies that can best build a cohesive strategy that integrates all of these talent-attraction and workforce-management ideas together will be best positioned to achieve their recruitment and retention goals regardless of outside market forces.

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In order to maximize the effectiveness of marketing efforts designed to attract and retain the talent your company relies on to succeed, some ideas worth considering include:

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• Targeting your audience with precision. By first developing a clear understanding of exactly the type of talent you want to attract, you can then better focus your research into how best to attract those groups, which enables you not only to better design benefits package offerings to suit the needs of that set of desirable employees, but you can also tailor communications and marketing messages/tactics to better reach that audience so you can meet them on their level. 
• Emphasizing positive culture. The best place to start when looking for ways to better highlight the aspects of company culture that are worth showcasing to prospective employees is to get feedback directly from current employees. Ask them what aspects of their job and the company that they value the most, and call as much attention to those aspects as possible. Incidentally, collecting some info at the same time about the aspects of their jobs and the company that employees value least can yield some helpful insights, as well.
• Conducting regular audits of your hiring materials. Too often, hiring material copy, language, design, and/or information becomes outdated long before it is updated. As your company’s brand and culture evolve, it’s important to make sure your hiring materials and talent-facing communications - including job postings and other hiring messages, etc. - remain in line with those changes. 

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With this approach, your company can craft recruitment-centric marketing campaigns that find resonance with the very talent pool that you’re seeking to engage, and can also have the tangential effect of broadening company awareness and improving company reputation, which in turn can help bring in even more quality applicants in a positive feedback loop. 

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You can read more about this topic here. 

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Before breaking for summer recess, the Supreme Court released a decision that will make it significantly more difficult for employers to deny employee requests for religious accommodation. 

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On its face, the new ruling is simply a clarification of a standard for interpreting Title VII of the Civil Rights Act that was established by the Court in the late 1970s and had served as precedent ever since. 

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Title VII requires qualifying employers that have more than 15 employees to make reasonable accommodations for the sincerely held religious beliefs, practices, and observances of their employees so long as those accommodations don’t impose an undue burden on the employer. The issue in question is what constitutes an “undue burden.”

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Between 1977 and the Court’s latest issuance, an accommodation that met the undue burden standard was interpreted under the law to be any accommodation that requires employers to incur more than a de minimis, or trivial, cost as a result of making the accommodation. While there remained some degree of imprecision in terms of what costs qualify as de minimis, generally speaking this interpretation significantly favored employer discretion in making these determinations.

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As of this recent ruling in the case of Groff v. DeJoy, however, the Court has reinterpreted TitleVII of the Civil Rights Act to require employers to make all reasonable accommodations unless the employer can show that the accommodation would lead to “substantial increased costs in relation to the conduct of its particular business.” This new standard clearly heightens the burden placed on employers to deny accommodations.

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While the Court stated that it did not believe the new standard would have much if any substantial effect on current EEOC guidelines on these issues, employers would be wise to prepare for an expected increase in religious accommodation requests and have a plan for how best to manage them. 

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To those ends, one potential starting point is working with legal counsel to better understand what evidence will be required in order to deny an employees’ religious accommodation requests, including how state and local laws may come into play. These inquiries will also likely include considerations ranging from the employer’s financial resources to safety implications and of course the impact that non-accommodation will have on the employee.

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Further, employers would be wise to invest in training for managers and the human resources team on how to navigate these requests under the new standard. Also, company materials including employee handbooks, conduct policies, and relevant procedures should be updated to clarify the new practices and expectations. 

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Unlike regulatory rules, there is no delayed implementation with Supreme Court rulings, so this clarification of the undue burden standard is currently in effect and is already being considered in legal disputes over religious accommodation requests. Employers that want to stay ahead of the curve will be proactive in their approach to religious accommodation requests not just through adherence to the new interpretation of Title VII, but also through establishing an inclusive environment that encourages both cross-cultural respect and dedication to the company mission in a way that minimizes conflict over these issues in the first place.

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You can read more about this topic here.

When structured and implemented well, a 401(k) plan can be an important component of an employee's financial well-being and state of mind. Selecting an advisor for your company’s 401(k) plan is an important first step to building a plan, as they will play a crucial role in its creation, implementation, and administration. The right plan can help to secure your employees’ financial futures, improve employee morale, and help attract and retain top talent to and in your company.

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A trusted advisor fosters employee confidence, which in turn can help to maximize engagement. No matter how good of a 401(k) plan you create, it’s not helping anyone if it isn’t being used. This is just one of the many reasons we will outline below for why choosing the right 401(k) advisor is critical to delivering this benefit to your employees.

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The Importance of Choosing the Right 401(k) Advisor 

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The needs of most small and medium-sized businesses are different. This makes it imperative that employers choose a competent advisor who can assist in designing and implementing a 401(k) plan that aligns with your company's specific goals and needs. The right advisor should provide guidance on plan design options, investment choices, and other critical factors to ensure the plan is well-suited for your employees' needs.

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Furthermore, a good 401(k) advisor can educate both employers and employees about the plan's features, benefits, and contribution options. This can be done through in-person seminars at your company, informational literature outlining the plan, or simply helping you to be prepared for questions that your employees may have.

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This educational support helps employees understand the importance of saving for retirement and empowers them to make informed decisions regarding their financial future. Perhaps most importantly, it educates them about their options and gives them control over securing their retirement goals.  

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The Risk of Having a Poorly-Designed 401(k) Plan 

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A poorly designed 401(k) plan may result in limited investment options, high fees, and inadequate support services. This can negatively impact employee participation, engagement, and overall retirement outcomes. As noted above, a 401(k) plan that isn’t used doesn’t do any good for anyone, so it’s worth making the effort to ensure the plan is beneficial to all.

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In addition, a subpar 401(k) plan can expose employers to legal and regulatory risks. Failing to comply with the complex laws and regulations from the IRS and ERISA governing retirement plans can lead to costly penalties and potentially even lawsuits. 

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The Three Main Functions of 401(k) Providers 

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401(k) providers typically fulfill three primary functions: the advisor, the custodian, and the record keeper. Each role outlined below must work together to ensure the successful implementation and operation of a 401(k) plan:

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• The Advisor: The advisor's primary responsibility is to guide employers in selecting and managing the plan's investments. They assist in constructing a diversified investment lineup, monitoring performance, and providing ongoing advice to plan participants. This guidance can significantly impact the plan's success. 
• The Custodian: The custodian is often a financial institution that holds and safeguards the plan's assets. They are responsible for executing trades, ensuring proper recordkeeping, and maintaining accurate participant account balances. Employers should choose a custodian with a solid reputation for security and reliability. 
• The Record Keeper: The record keeper is responsible for maintaining accurate records of participant contributions (and that they stay within guidelines), investment allocations, and distributions. They handle administrative tasks such as processing contributions, generating participant statements, and managing compliance reporting. An efficient record keeper streamlines the plan administration and enhances the participant experience. 

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Protecting Your Plan and Employees through the Fiduciary Standard 

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When evaluating 401(k) advisors, it is crucial to consider their history of adherence to the fiduciary standard, which means that they are legally obligated to act in the best interest of their clients. This standard ensures that advisors prioritize the welfare of plan participants, and minimizes conflicts of interest that could compromise the plan's success. 

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In contrast, advisors following the suitability standard are only required to recommend suitable investments, even if they may not be the best option for participants. Employers should prioritize working with fiduciary advisors to provide the highest level of protection for their employees and mitigate potential legal risks. 

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Evaluating a 401(k) Plan Provider 

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Choosing a 401(k) plan provider involves evaluating various factors to ensure they align with your company's needs and priorities. The following key aspects should be considered when assessing potential providers: 

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• Plan Setup and Processing: A good provider should offer a streamlined process for setting up and administering the plan, minimizing administrative burden, and maximizing efficiency. 
• Participant Engagement: Look for providers that offer robust educational resources, user-friendly interfaces, and tools to encourage participant engagement and improve financial literacy. The better employees understand the 401(k) plan, the more likely they are to utilize it.
• Customer Care: Strong customer care is crucial to addressing plan-related inquiries and resolving issues promptly. Ensure the provider offers reliable and accessible support channels so that someone is there to answer your employees’ questions when they arise.

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Evaluating Your Advisor's Expertise, Education, Licensing, and Resources 

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In addition to assessing the plan provider, you should also take care to evaluate your advisor's qualifications. Consider the following aspects to ensure your advisor is well-equipped to provide quality guidance: 

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• Expertise: Look for advisors with experience in the retirement planning industry and a track record of success. They should demonstrate a comprehensive understanding of 401(k) plans, investment options, and industry trends. 
• Education and Licensing: Verify that your advisor possesses relevant certifications, such as Certified Financial Planner (CFP) or Chartered Retirement Plan Specialist (CRPS). These designations indicate a commitment to ongoing education and ethical standards. 
• Resources: Consider whether the advisor has access to a wide range of investment options and resources to provide comprehensive guidance tailored to your employees' needs. 
• Disclosures: Advisors and their firms must report negative actions or significant customer complaints through disclosures to the regulatory agencies, and there are publicly-available platforms through which these can be checked. Do your due diligence to see if an advisor you are considering has any disclosures which may be concerning.

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Financial Advisor Fees and Compensation 

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An employer should also consider the financial advisor’s fees when selecting a 401(k) advisor. Different fee structures exist, and some will cost more than others. Some examples of advisor-related fee structures are based on the percentage of Assets Under Management (AUM), hourly fees, or flat fees.

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Consider the following aspects related to financial advisor fees: 

• Average Fee for a Financial Advisor: While the specific fees can vary depending on the advisor and services provided, the average fee for a financial advisor typically ranges from 0.5% to 2% of assets under management. 
• Financial Advisor Compensation: It is important to understand how advisors are compensated to ensure there are no conflicts of interest. Fee-only advisors, who are compensated solely by their clients, tend to have fewer conflicts compared to advisors who receive commissions or other incentives from providers. 
• Ensuring Fair Financial Advisor Fees: To ensure fair fees, consider obtaining fee quotes from multiple advisors and comparing them based on the services provided. It is also important to review the advisor's value proposition, professional reviews, and the level of personalized service they offer.

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Reducing Financial Advisor Fees 

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If you are concerned about financial advisor fees, there are several strategies to consider:

• Negotiate: Don't be afraid to negotiate fees with your advisor, especially if you have a sizable plan or multiple services bundled together. 
• Fee Benchmarking: Compare your advisor's fees with industry standards to ensure they are reasonable. Industry benchmarking studies can provide insights into typical fee ranges. 
• Review Services: Assess whether all the services provided by your advisor are necessary for your plan. It may be possible to eliminate or modify certain services to reduce costs without compromising the plan's quality. 

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The Bottom Line

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Implementing a 401(k) plan for your company can help to boost morale, attract & retain top talent, and allow your employees to focus on work rather than worrying about their financial future. Selecting the right 401(k) advisor is crucial for both employers and employees, as they will play a major role in the plan’s design and administration.

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By considering the importance of a competent advisor, the risks associated with a poor 401(k) plan, and evaluating the functions of 401(k) providers, employers can make informed decisions to protect their plan and employees. From the outset, creating a plan for your company may seem like a monumental task, but the right 401(k) advisor will help shoulder much of the burden and keep the plan on track.

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Choosing the right 401(k) advisor for your needs can make the process both efficient and effective, so it’s imperative to do your due diligence based on the information provided above.