A whirlwind of regulatory changes are coming in 2012 for 401(k) plans.  If you are a plan sponsor (employer), you should consider the following action items to make sure you stay up to date and are fulfilling your fiduciary responsibilities to the plan.

Benchmark Your Plan - ERISA requires the plan sponsor, as a fiduciary, to ensure that plan expenses for participants are reasonable. The best way to document your fulfillment of this obligation is to have an independent third party prepare a benchmarking study. The study should include a comparison of all fees, investment diversification and performance parameters (contribution rates, participation rate, utilization rate etc.) to those of similar plans based on total assets, number of participants, average account size and industry.

Review Your Plan’s Investment Policy - An effective written investment policy can go a long way toward avoiding plan sponsor ERISA liability. An effective investment plan should detail how the plan’s investments are chosen (diversification, performance, cost etc.) and how often they are reviewed and the review procedure. 

Prepare for the U.S. Dept. of Labor’s New Regulation on Participant Fee Disclosure - Even though the regulation stipulates that the Plan Administrator (employer) is responsible for compliance, realistically the plan record keeper is going to have to provide this data to plan participants. Ask your record keeper to provide you, in writing, with details of how your plan will comply.  Get estimates of what your employees will see on those disclosures and be prepared for their questions. Many will be surprised that there are any costs associated with their 401(k).

Review Your Fiduciary Risk Exposure from Your 401(k) Plan - ERISA bestows on the plan sponsor a fiduciary duty to act in the best interests of the plans participants and to see that the plan is operated for their sole benefit. Many plan providers and consultants provide a fiduciary checklist to help you spot weaknesses and deficiencies in plan operations, investments and investment advice. Many times these checklists are free and can save you a lot of headaches should DOL drop by for a plan audit.

Talk To Your Employees about Your Plan - Face it, ERISA lawsuits are initiated by unhappy participants. Are your employees happy with your 401(k) plan? Is it the benefit it was intended to be?  What are your employees’ experiences like when they seek advice and guidance?  Is your plan focused on positive outcomes, i.e. successful retirements?

Shop Your Plan - The 401(k) landscape is changing rapidly due to increased regulation, competitive pressure and litigation. The positive side to this is that costs are being driven down and both the availability and quality of investment advice are increasing. It has never been more possible to obtain a better deal, both for you and for your employees.

We have free resources available to help you analyze and benchmark your 401(k) plan and review your fiduciary risk exposure. We can help guide you through the tasks above to ensure that you are protecting both yourself and your employees. Contact us at ryan.hastings@rlhcpa.com