Companies that sponsor 401(k) plans for their employees can sometimes underestimate the responsibilities that they should perform in order to properly monitor the plan and ensure that they are not exposed to claims that they have failed their fiduciary responsibilities. Although a significant amount of the plan administration can be performed by third-party services providers (also referred to as TPAs), the sponsoring company must not fail to supervise and oversee these services. This is just one of several fiduciary responsibilities that sponsoring companies can easily overlook. Following is a listing of “best practices”:
- Establish a benefits committee to oversee the operations of the plan.
- Select and monitor TPA, including reviewing results of TPA’s internal controls audits.
- Adopt a formal investment policy addressing permitted investments, asset mix and method of monitoring overall return on investments.
- Ensure that proper bonding is maintained.
- Ensure that contributions are remitted to the plan in a timely manner.
- Ensure that plan expenses are reasonable and proper.
- Ensure that all required plan information is furnished to participants.
- Ensure that all required filings are submitted to government agencies including audited financial statements for plans that require an audit.
- Identify parties of interest, monitor their transactions.
These are just some of the recommended best practices for fiduciaries. For additional resources see government publications at http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html and professional publications at http://ebpaqc.aicpa.org/Resources/Plan+Sponsor+Resource+Center/.
Kim Lubbers, CPA