There is a big difference between a checkup and an autopsy.
A checkup is designed to find problems while you still have an opportunity to do something about them. An autopsy tells you what went wrong after it’s already too late.
Too many plan sponsors treat their 401(k) plans like the latter.
They don’t review plan operations. They don’t check whether the plan is being administered according to the document. They don’t review fees. They don’t review investments. They don’t confirm that payroll is properly applying the plan’s definition of compensation. They simply assume everything is fine because nobody has told them otherwise.
Then something happens.
Maybe an auditor discovers a problem. Maybe an employee complains. Maybe the company changes TPAs and the new administrator discovers years of operational errors. Or maybe the IRS or Department of Labor decides to take a look.
Suddenly, everyone wants a complete review of the plan.
That’s an autopsy.
A periodic independent review can identify problems when they’re smaller, cheaper, and easier to correct. Are eligible employees actually being offered participation? Are contributions being deposited timely? Is compensation being calculated correctly? Are distributions and loans being administered according to the document? Are plan fees and investments being reviewed?
None of this is particularly glamorous, but neither is writing a large check to correct something that could have been discovered years earlier.
Retirement plan mistakes rarely get better with age. A small operational error repeated for five years can become an expensive correction involving multiple participants, lost earnings, amended filings, and professional fees.
Plan sponsors spend money maintaining their buildings, computers, machinery, and other important business assets.
Your 401(k) plan deserves maintenance too.
Give your plan a regular checkup.
It’s considerably cheaper than paying for the autopsy.