One of the biggest problems with administering a 401(k) plan is that sometimes all the knowledge about the plan resides with one employee.<\/p>\n
Then that employee quits.<\/p>\n
Suddenly, nobody knows how contributions are transmitted, who sends the census to the TPA, where the plan documents are located, or even who the contacts are at the recordkeeper.<\/p>\n
I\u2019ve seen it happen too many times.<\/p>\n
A plan sponsor relies on one HR or payroll employee for years. That employee knows everything about the plan, but very little of that knowledge is documented. When they leave, their institutional knowledge walks out the door with them.<\/p>\n
That\u2019s when mistakes happen.<\/p>\n
Payroll contributions can be delayed. Eligibility dates can be missed. Notices aren\u2019t distributed. Provider requests get ignored because they\u2019re sitting in an email account nobody is monitoring.<\/p>\n
A 401(k) plan shouldn\u2019t depend on one employee\u2019s memory.<\/p>\n
Plan sponsors should have written administrative procedures covering the basic operation of the plan. Who handles payroll contributions? Who reviews eligibility? Who communicates with the TPA? Who approves distributions? Where are important plan records maintained?<\/p>\n
There should also be a backup employee who understands these responsibilities.<\/p>\n
Cross-training isn\u2019t exciting, but neither is explaining to the Department of Labor why participant contributions weren\u2019t deposited because Susan from payroll left three months ago.<\/p>\n
Providers can help with transitions, but ultimately, the plan sponsor is responsible for making sure someone is minding the store.<\/p>\n
Employees leave. They retire. They get promoted. Sometimes they get hit by the proverbial bus.<\/p>\n
Your 401(k) plan should be able to survive any of those events.<\/p>\n
If the entire administration of your retirement plan depends upon one person\u2019s memory, you don\u2019t have a system.<\/p>\n
You have a future problem.<\/p>\n
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