Enhancing Efficiency in Company Retirement Plan Administration

When managing a company retirement plan, streamlining administrative tasks can boost both the plan's efficiency and your own (or your team’s) productivity. Most companies aren’t large enough to staff a full-time 401(k) manager, leaving the day-to-day plan management activities to fall to someone with plenty of other obligations on his or her plate, whether the CFO or an HR professional.

That said, keeping the retirement plan operating at peak performance is key to maximizing its value for the company’s plan participants. So, while it might not be realistic to have someone inside the organization keeping a proverbial eye on the retirement plan at all times, there are some policies and procedures that companies can and should put in place for the betterment of both the employees and employer alike.

Here are a few strategies that we, as retirement plan advisors, suggest to help make the administrative side of managing a company’s retirement plan more efficient.

1. Engage a Committed Advisor

Having a dedicated advisor overseeing your plan can significantly reduce the administrative burden. Your advisor should act as a “quarterback,” coordinating between your team and the various stakeholders involved.  

From coordinating fiduciary processes to handling oversight of the plan, a truly engaged and committed advisor will ensure that key requirements are consistently met, ultimately making plan administration easier and more efficient. It should be easy to determine whether the advisor is truly engaged: Do they proactively make recommendations and seek your time for consultations and conversations? If so, you’ve found one who’s truly engaged. If not, consider what you might be missing out on.

2. Leverage 3(16) Fiduciary Services for Plan Administration

What’s known as a 3(16) fiduciary for a retirement plan is someone responsible for the daily operation of the plan, with duties outlined by ERISA. A 3(16) fiduciary service or professional can assume many administrative responsibilities that traditionally fall on plan sponsors.  

When designated and empowered, the 3(16) fiduciary can manage tasks that include sending employee notices, approving and signing off on distributions, loans and hardship withdrawals, as well as preparing and filing the IRS Form 5500. Offloading these responsibilities to a 3(16) fiduciary can save your team considerable time and effort, as your internal team won’t have to manage each administration task individually, freeing staff up to focus on more urgent priorities.

3. Optimize Payroll with 360° Integration

A significant administrative task relative to 401(k) plans involves synchronizing payroll and retirement plan data. Traditionally, when an employee updates a deferral percentage on the recordkeeping website, payroll staff must manually adjust the company’s payroll system to account for the change. However, a 360° integration between payroll and recordkeeping systems automates this process, instantly reflecting changes and eliminating the need for manual data entry.  

This seamless integration also facilitates smoother year-end reporting by automatically sharing payroll data with the recordkeeper throughout the year so that, when reports need to be pulled and filed at the end of the year, all relevant data has already been tracked and stored — ready for the reporting.

4. Utilize 3(38) Fiduciary Services for Investment Management

Another valuable asset for the retirement plan sponsor is the 3(38) fiduciary. For companies without in-house investment expertise and professionals, a 3(38) fiduciary can make investment decisions on behalf of the plan, lessening the administrative load for the internal team.  

With this arrangement, the advisor is bestowed the discretion to make adjustments to the plan’s investment lineup without requiring employer approval for each change. Not only does this level of fiduciary protection offer the peace of mind that comes with knowing this work is being taken care of by a qualified professional, but it also helps the plan sponsor avoid time-consuming paperwork associated with investment updates that can sometimes be time-sensitive.

5. Maintain a Fiduciary File

Keeping a well-organized fiduciary file that contains all pertinent documentation — such as meeting minutes, employee notices, and compliance checklists — can streamline the process of handling year-end audits, regulatory audits, or reviews by the Department of Labor.  

An engaged advisor can help you build and maintain this file, ensuring that all necessary documents are readily available should an audit arise. A prepared fiduciary file can save valuable time in the event of an audit, but it can also provide a clear framework for the plan’s governance at all times, which is central to your role as a plan fiduciary, if you play any role in sponsoring or administering a retirement plan.

6. Conduct Routine Compliance and Governance Reviews

Consistent, documented fiduciary oversight is essential for keeping a retirement plan compliant. Advisors should hold periodic fiduciary review meetings, providing a checklist to ensure the plan operates within regulatory frameworks. Regular reviews help catch issues early, keep the plan compliant, and prepare your organization for any potential audits.

7. Simplify Year-End Processes and Form 5500 Filing

Payroll data is often needed for year-end testing and filing IRS Form 5500. As mentioned above, plans with 360° integration automatically feed payroll data to the recordkeeper and administration provider throughout the year, reducing the need for manually compiling census data or contribution records. This efficiency can streamline the year-end testing and 5500 filing process and help your team avoid last-minute scrambling for required data at the end of the year, when you're most pressed for time and so much is on the plates of the internal team.

8. Choose an Experienced Auditor

While not strictly an efficiency enhancement, a good auditor can make a notable difference in simplifying the audit process. Should a DOL audit come to pass, there is no question that those enduring such a distraction and disruption would welcome enhanced efficiency where it can be found.  

A knowledgeable auditor familiar with retirement plan requirements will help you navigate the audit requirements and other compliance obligations well in advance. With strong payroll and recordkeeping integrations noted earlier, audit preparation can be much easier, as much of the required information will already be organized and readily accessible.

Efficiency and Compliance: The Ultimate Win-Win

Implementing these steps not only enhances the efficiency of your retirement plan administration but also contributes to the plan’s overall compliance and performance, making it simpler for your team to focus on mission-critical responsibilities, knowing the retirement plan is being managed as it should be.

Remember, ERISA guidance recommends that fiduciaries seek expert advice if they are not equipped  to handle complex retirement plan duties.

How efficiently is your retirement plan being managed? Download our free assessment, “16 Questions to Score Your Organization's Retirement Program,” to find out!