If I had a dollar for every time a plan sponsor asked me a question that was already answered in their plan document, I\u2019d probably have enough money to retire.<\/p>\n
The retirement plan document isn\u2019t something you sign once and toss into a filing cabinet. It\u2019s the legal blueprint for how your 401(k) plan is supposed to operate. Yet many plan sponsors have never read it beyond the signature page.<\/p>\n
That\u2019s where problems begin.<\/p>\n
I\u2019ve seen employers accidentally exclude eligible employees because they misunderstood the eligibility provisions. Others have made matching contributions that didn\u2019t align with the formula in the document. Some have allowed distributions or loans that weren\u2019t even permitted under the plan\u2019s terms. None of these mistakes were intentional, but good intentions don\u2019t eliminate fiduciary responsibility.<\/p>\n
Your service providers should know your document inside and out, but ultimately the plan sponsor is responsible for ensuring the plan is operated according to its written terms. That\u2019s one of the fundamental requirements of ERISA.<\/p>\n
I\u2019m not suggesting every business owner become an ERISA lawyer. I am suggesting you spend an hour every year reviewing the provisions that matter most: eligibility, entry dates, employer contributions, vesting, distributions, and loans. If something doesn\u2019t make sense, ask your TPA or ERISA attorney to explain it.<\/p>\n
A plan document shouldn\u2019t be a mystery. It should be a resource. The more familiar you are with its provisions, the less likely you\u2019ll encounter operational failures that require costly corrections.<\/p>\n
Your retirement plan is one of the most valuable benefits you provide your employees. Make sure you understand the rules that govern it. Reading your own plan document may not be exciting, but it could save you a great deal of time, money, and frustration down the road.<\/p>\n
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