When visiting with our clients, we often hear the familiar refrain from Human Resources departments regarding the additional strain being put on them as they race to comply with the onerous requirements of the ACA.
With that, HR departments are looking for ways to possibly offload some of their current workload. What many of our new clients have been unaware of is that there are plenty of day-to-day duties related to the 401(k) plan that can typically be offloaded to their 401(k) provider. Many of the tasks such as preparing and sending employee notices, approving loans and hardships, etc. are menial, but can be incredibly significant when it comes to the potential penalties and consequences for not executing correctly. Penalties can be assessed on a per-day basis with other consequences of failure to properly deliver resulting in the plan’s loss of ERISA 404(c) protection, creation of a prohibited transaction, or even the disqualification of the plan.
In the small plan market (plans of less than $50 million of assets) plan providers do not always provide, in their default service model, their ability to complete these tasks. In most cases, these services are available for a nominal fee which many of our clients have found to be well worth paying in light of the burden that is being removed from company personnel. In many cases it gets even better, with the responsibility that they are done correctly falling on the provider with top providers even adding the benefit of fiduciary indemnification for the performance of these services under ERISA section 3(16).
Handing off some of the duties can be very worthwhile, especially considering the high level of compliance and regulation that so many small companies have to deal with. Without the budget to add staff the only answer is to do less with more. Offloading time consuming, but essential tasks is a great start.