One thing plan sponsors need to understand about a 401(k) plan is that it has a very long memory.
Employees leave. Human resources people leave. Payroll companies change. TPAs get fired. Recordkeepers get replaced. The company may even be sold.
The plan remembers everything.
An eligibility mistake from three years ago doesn’t disappear because the person who made the mistake no longer works for you. Incorrect compensation used for contributions doesn’t become correct because you switched payroll providers. A missed participant deferral isn’t erased because you moved the plan to a new recordkeeper.
Retirement plan problems have a funny way of surviving the people who created them.
I’ve seen plan sponsors assume that changing providers somehow gives them a fresh start. It doesn’t. In fact, a provider change sometimes uncovers problems because somebody new is finally looking at the plan and asking questions that the former provider never asked.
That’s why maintaining records is so important.
Plan sponsors should retain plan documents, amendments, testing results, Form 5500 filings, contribution records, payroll information, committee minutes, participant communications, and important correspondence with providers. When somebody asks what happened five years ago, “the person who handled that left” isn’t going to be a very satisfying answer.
The same is true when acquiring a company. You’re not just acquiring employees and assets. There may be retirement plan history attached to that company that needs to be understood.
A 401(k) plan isn’t like replacing an old computer and starting with a clean hard drive.
Its history follows it.
The best protection is good records, good procedures, and providers willing to ask questions about what happened before they arrived.
Because while people forget, your 401(k) plan has a very good memory.