As an employer, there are many responsibilities that fall on your shoulders. Your employees’ retirement plans are one of these. If you’re unsure about how to meet the new 401k standards, here are some ways to help you do so efficiently.
Start by Knowing Your General Duties
Each employer has what is known as fiduciary duties to those who hold a retirement account with them. First, you need to act in the best of interest of your plan participants and their beneficiaries. All your actions regarding their plans should be done with their benefit in mind. You need to carry out these responsibilities prudently and act according to plan documents that are consistent with ERISA. You must be offering diversified plan investments and only paying for plan expenses that are deemed reasonable.
Pick at Least Three Diversified Investment Options
Any good 401k advisor can help you to pick out a line-up of at least three different investment options. This will help to meet your fiduciary duty of offering diversified investment plans. A simple line-up of investment plans includes capital preservation such as a money market account, fixed income like a bond, and equity such as stocks. You don’t have to go crazy creating endless investment plans for your employees. Rather, stick to three basic ones that will make your 401k plans meet the federal standards.
Hand of Administrative Tasks to Your 401k Provider
When you first develop 401k plans for your employees, it’s best to hire a 401k provider. There are so many out there to choose from, some of the major ones being Fidelity, Vanguard, and Schwab. This 401k provider should be performing various administrative tasks for you. These tasks are part of your responsibility as an employer to meet federal standards.
Make Sure You Have Insurance
As with most things in life, you’re required to have insurance for handling your employees’ 401k accounts. This insurance comes in the form of an ERISA fidelity bond. The bond must be equal to the lesser of $500,000 or 10% of the total investment accounts that you hold. This insurance bond protects your company in the event that errors are found in your management of the 401k plan for an employee or employees.
The effort required to make you meet the new 401k standards can be a bit intimidating. There are a lot of aspects that go into determining these standards and understanding them fully might take the assistance of a 401k provider. The above four tips will help to ensure that you’re well on your way to meeting all the new standards with ease.
Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most of her time hiking, biking, and gardening. For more information, contact Brooke via Facebook at facebook.com/brooke.chaplan or Twitter @BrookeChaplan