Your 401(k) Plan’s Year-End Checkup: What Employers Should Review
As the year winds down, business owners are often focused on budgets, taxes, and preparing for the year ahead. Your company’s 401(k) plan deserves a spot on that list, too.
A year-end review is an opportunity to catch discrepancies, update employee information, and make sure outstanding tasks have someone assigned to them. The IRS encourages employers to regularly review their retirement plans to confirm they are operating according to their plan documents. Internal Revenue Service
Here are a few good places to start.
Make sure payroll and plan records agree
Your payroll records and retirement plan records should tell the same story. Compare employee contribution elections with what is actually being withheld and deposited into the plan.
For example, if an employee elected to contribute 6% of pay, does payroll reflect that election? Have recent changes been processed? Are contributions being calculated using the correct definition of compensation under your plan?
Checking these details can help identify small discrepancies before they become larger problems. Employee contributions also need to be deposited on time throughout the year, so this should be an ongoing process. Internal Revenue Service
Review employee eligibility
New hires, rehires, and employees with changing work schedules can be easy to overlook. Confirm that employees who met the plan’s eligibility requirements received the opportunity to participate, and check whether any automatic enrollment provisions were applied correctly.
Pay particular attention to part-time employees. Ask your third-party administrator to help determine whether anyone qualifies under the rules that apply to your plan.
Update contact information and encourage beneficiary reviews
Accurate employee information helps your providers deliver plan communications and reach participants when needed. Review available reports for missing or outdated mailing addresses and email addresses, including those for former employees who still have a balance.
This is also a good time to remind employees to review their beneficiaries. Marriage, divorce, a new child, or a death in the family may prompt someone to revisit a designation. Encourage employees to confirm that their choices are on file and reflect their wishes.
Review fees, investments, and service
Your annual review should include a conversation about plan investments, fees, and the service you and your employees receive.
Are questions being answered promptly? Do employees know where to turn for help? Are fees reasonable for the services provided? Documenting these discussions and following up on concerns helps support an ongoing oversight process. U.S. Department of Labor
Close the loop on outstanding items
Before year-end, ask your plan providers what remains open. This might include missing census information, required notices, plan amendments, or questions about employer contributions.
Keep a short list showing who is responsible for each item and when it is due. Deadlines vary, so confirm them with the provider handling the task.
Your retirement plan is an important benefit for your employees and your business. Giving it regular attention can help it run more smoothly—and make the next year easier to manage.
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