Top 6 Tips for Managing Your 401(k) Plan

As one of the most popular vehicles for retirement savings, your company 401(k) delivers a range of benefits. It offers employees several tax advantages, and it can help you engage and retain talent as an important part of your company’s overall benefits program.

Top 6 Tips for Managing Your 401(k) Plan

November 5, 2021

As one of the most popular vehicles for retirement savings, your company 401(k) delivers a range of benefits. It offers employees several tax advantages, and it can help you engage and retain talent as an important part of your company’s overall benefits program.

However, because the 401(k) plan is regulated by the IRS, it also carries many complexities and nuances you need to understand and communicate to your workforce. In this post, you’ll learn about the top actions you should take to manage your company 401(k) plan for compliance and maximum benefit to your employees.

6 Key Steps to Effective 401(k) Plan Management 

According to the Plan Sponsor Council of America, more than four in five employees contribute to their company’s 401(k) plan. But to ensure employees get the most from their participation, you also need to regularly review your plan and offer resources to help employees make informed decisions. Taking the following actions will help you achieve those goals:

Consider design changes carefully 

Implementing a 401(k) plan isn’t a “set it and forget it” kind of exercise. You need to periodically review your plan for design changes that make the most sense for your organization and workforce. For example, you may decide that automatic enrollment is an effective way to encourage employees to participate in your 401(k) plan. You may also choose to offer new investment options to help employees balance their accounts more effectively. 

Track and communicate contribution limits

Each year, the IRS communicates 401(k) contribution limits. In 2021, the employee contribution limit is $19,500, and the catch-up 401(k) contribution limit for employees over 50 is $6,500. The IRS also limits the total contributions to an employee’s 4o1(k) account, inclusive of company matches. To ensure employees understand the limits and their opportunities for saving, you’ll need to communicate contribution parameters and provide regular reminders throughout the year.

Educate employees about your plan

While some of your employees may be well-educated about participating in a 401(k) plan, others may be unfamiliar with the process and need help making contributions and accessing plan resources. Some may not even be aware of your 401(k) plan and the benefits it offers. A Morning Consult survey found that nearly one-third of employees didn’t know if their company offered a retirement plan. To educate your workforce, you’ll need to routinely offer opportunities for employees to learn about your plan, for example, through information sessions during open enrollment and via an online learning library.

Follow filing requirements and deadlines

To operate a compliant 401(k) plan, you need to follow IRS guidelines for annual reporting. For example, in addition to reporting annual 401(k) contributions and distributions on employee W-2s, most companies also need to file IRS Form 5500 and other applicable reports. Not filing the correct forms or submitting them late can expose your organization to non-compliance penalties, so it’s critical to have a process for completing and filing the forms by the stated deadlines.

Determine matching options

One of the most attractive aspects of a 401(k) plan to employees is the company match, and many companies offer one. According to an XpertHR benefits survey, 82 percent of employers that offered a 401k plan said they matched at least some portion of employee contributions to the plan. Whether you already offer a match or you’re considering adding one, you need to weigh your options carefully, determine what you can afford, and have processes in place to allocate matches within allowable IRS limits.

Use available support to administer your plan

While it’s not impossible to manage your company 401(k) plan on your own, you’re likely to administer it more successfully when you have help. By working with a partner to help you manage employee contributions and communications, plan reviews, and IRS filings, you can lighten your workload while also getting help to operate a more compliant plan. 

Operate Your 401(k) Plan More Efficiently

Though your 4o1(k) plan provides employees with benefits to help them save and invest in their future, it also comes with some compliance hurdles and other responsibilities. To manage your plan for optimal benefit to your employees while keeping track of IRS requirements and deadlines, consider working with an outsourced HR services partner to help you. At MarvelHR, we offer expert HR support to help you manage your 401(k) plan and other employee benefits. Contact us to learn more.

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