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The Joseph Group

It’s the Little Things

February 14, 2025

In the 401(k) world we, as specialists in the space, spend a substantial amount of time consulting with plan sponsors on a handful of big decisions when starting or operating an effective retirement plan. Most of these revolve around some of the main fiduciary aspects like managing a prudent lineup, making sure that plan design both fits what’s needed by the company and keeps the plan compliant, and selecting the right vendors at reasonable costs. If you pull up the Department of Labor’s website, you’ll see why. These are all critical parts of being a plan fiduciary.

But what are some of the smaller things that go into managing an effective plan that require your attention? Of the many items that need to be reviewed and completed, I just want to focus on three that I find are most often overlooked.

Fidelity Bond – The Department of Labor requires that plans generally have a Fidelity Bond covering at least 10% of the plan’s total assets up to a maximum of $500,000 or $1,000,000 if the plan includes company securities. This bond would cover persons who have the ability to touch or move the money in the plan and would cover an act of fraud or dishonesty on behalf of a plan official. This bond also needs to be updated as your plan grows, although some are designed to grow with your plan. For example: If your plan was $1,000,000 when you first purchased the bond, you would have only needed a $100,000 bond. Now that your plan is $3,000,000 that bond needs to be for $300,000. There is a little more to this coverage and process than what I have covered here, so I recommend discussing this with an insurance professional. Just know this is a requirement that is reported on the 5500 each year. Long story short, if you don’t have one, they’ll find out!

Investment Policy Statement – Often confused for being an optional document, an Investment Policy Statement or IPS is a required document that helps guide investment decisions for the plan and plan participants. While typically this is between investment advisors and plan sponsors, even if you do not have an investment advisor, you still need to have an IPS. While the IPS can vary in its wording and provisions between companies and plans, typically this document provides some guardrails to help guide the 401(k) team in running a retirement plan in accordance with best practices. Every plan should have one of these and review it periodically. Can reading your IPS solve insomnia? Potentially… Is it important to have one and know what’s inside? Yes! I know, it’s not the easiest of reads, but paying attention and knowing what is contained within can save you a lot of trouble down the road.

Document Storage – Who called the fun police? All kidding aside, we are often asked how long a plan sponsor needs to keep certain files on hand regarding their 401(k) due diligence and/or anything relating to general retirement plan operation. The short answer is that Sections 106 and 209 of ERISA state that if it’s related to the annual 5500 filing, the answer is 6 years from the date of the filing. This can include anything from notices, compliance documents, plan documents/contracts and several other types of information. What you will find is that most services providers are recommending and maintaining records for 7 years. Thank you, technology, for saving us from having a sea of filing cabinets!

These are just a few of the “little things” that can make a big difference in the long term. When it comes to being a plan sponsor, you have a lot of responsibilities to your employees so it’s important to make sure you have good plan partners in place to help guide you through everything. The Joseph Group has a great Fiduciary Focus List tool to help guide you through all the little things (and big ones too) that go into managing an effective plan. Please give us a call if you would like to review your plan through the Focus list to make sure you’re checking all the boxes.

 

 

 

 

Written by Matt Kruckenberg, Manager of Retirement Plan Services. Matt can be reached at 614-907-8639 or matt.kruckenberg@josephgroup.com