Whether you have a one-person company or employees in the hundreds, making sure your employer-sponsored retirement plan works for both you and your team is not just good business – it’s the law.
ERISA statutes require you as the plan sponsor to either assume or outsource fiduciary responsibility for the company retirement plan you offer your employees. That responsibility can be greater than you might expect.
As the plan sponsor, you need to make sure that your retirement plan:
- has adequately low costs and adequate quantity and quality of investment selections across a wide variety of asset classes and strategies
- is able to meet the general investing needs of your participants, no matter their age and risk tolerance
- makes sure participants are properly investing for their individual time horizons and risk preferences
- has an adequate enrollment of all eligible participants and doesn’t disproportionately favor the owners/managers/executives
- has proper default investment options and suitable interest-bearing cash alternative funds (instead of cash or money market funds)
And even just setting it up properly is not enough. Your plan has to be continually monitored for:
- excessive plan fees that “eat up” your participant’s returns over time
- participation rates among your employees
- conflicts of interest in the available investment selections (like proprietary funds of the plan custodian)
- participant education and access to advice
- investment quality and variety to meet the diverse needs of your workforce
As a plan sponsor, you have two choices: do this work yourself, or have a financial professional assume that responsibility for you.