Addressing 5 Common Challenges Faced by 401(k) Plan Sponsors

As a retirement plan advisor, it's essential to understand the common challenges that 401(k) plan sponsors encounter and how working with an experienced advisor can address these issues. Plan sponsors play a critical role in ensuring that their employees have access to competitive and beneficial retirement plans. Here are the five main problems plan sponsors face and how collaboration with a seasoned advisor can make a difference:

1. Plan Compliance

Maintaining compliance with regulatory requirements is one of the most pressing challenges for 401(k) plan sponsors. The laws governing retirement plans are complex and constantly evolving, making it easy for sponsors to inadvertently fall out of compliance. Non-compliance can result in costly penalties and legal issues. An experienced retirement plan advisor helps ensure that your plan adheres to all regulatory requirements by staying informed about industry changes and proactively addressing compliance issues. This partnership can help prevent potential legal concerns and provide peace of mind.

2. Employee Participation and Engagement

Achieving high levels of employee participation and engagement in a 401(k) plan is crucial for its success. Many employees may not fully understand the benefits of participating in a retirement plan or may be uncertain about their investment options. A retirement plan advisor can implement strategies such as automatic enrollment and contribution escalation to encourage greater participation rates. Additionally, advisors can facilitate workshops and informational sessions to increase awareness and engagement, helping employees take full advantage of their retirement planning opportunities.

3. Proper Investment Monitoring

Monitoring the investment options within a 401(k) plan is essential to ensure they remain competitive and aligned with participants' needs. However, this task requires expertise and ongoing attention to detail. A knowledgeable advisor can provide regular reviews of investment performance, analyzing factors like fees, risks, and returns. They offer detailed reports and facilitate regular meetings to discuss investment strategies, helping plan sponsors make informed decisions and maintain a plan that supports employees' long-term financial goals.

4. Employee Education

Education plays a pivotal role in empowering employees to make informed decisions about their retirement savings. Yet, many plan sponsors struggle to provide comprehensive educational resources. A retirement plan advisor can bridge this gap by developing tailored educational programs that cover critical topics such as investment strategies, risk management, and retirement planning basics. By equipping employees with the necessary knowledge, sponsors can enhance financial literacy and enable workers to make confident choices about their retirement savings.

5. Overall Plan Costs and Administrative Efficiencies

Managing plan costs and achieving administrative efficiencies are ongoing challenges for plan sponsors. High fees and inefficient processes can erode the benefits of a 401(k) plan. An experienced advisor assists in evaluating and negotiating fees with service providers, ensuring they are reasonable and competitive. Additionally, advisors streamline administrative processes, helping sponsors reduce complexity and improve operational efficiency. This collaboration ultimately enhances the plan’s value, benefiting both the employer and employees.

Conclusion

Partnering with an experienced retirement plan advisor offers numerous advantages for 401(k) plan sponsors. From ensuring compliance and boosting employee participation to monitoring investments and enhancing education, advisors provide crucial expertise and support. By addressing these five main challenges, sponsors can optimize their retirement plans, leading to improved outcomes for employees and a more secure financial future for all involved.

If you feel that your retirement plan is not running as smoothly as it should and would like a professional to look under the hood, give us a call at 210-998-5008 or email us at gcastillo@pws-texas.com.

Gil is the Director of Retirement Plans at Platinum Wealth Solutions of Texas specializing in retirement plans for companies, executive benefits programs and retirement planning for business owners, and individuals. He is chartered retirement plan counselor CRPC? and a certified plan fiduciary advisor CPFA?.

Securities offered through Osaic Wealth, Inc. member FINRA/SIPC. Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth.