If you sponsor a 401(k) plan for employees, you understand it’s a lot to manage. But manage it you must. Under the Employee Retirement Income Security Act of 1974 (ERISA), you have a fiduciary duty to act prudently and solely in participants’ interests.

Once a plan is launched and operational, it may seem to run itself. However, problems can arise if you fail to actively oversee administration. With 2025 winding down and a new year on the horizon, now may be a good time to review your plan’s administrative processes and fiduciary procedures.

Investment Selection & Management

Study your plan’s investment choices to determine whether the selections available to participants are appropriate. Does the lineup offer options along the risk-and-return spectrum for workers of all ages? Are any premixed funds, which are based on age or expected retirement date, appropriate for your employee population?

If the plan includes a default investment for participants who haven’t directed their investment contributions, determine if that option remains appropriate. In the event your plan doesn’t have a written investment policy or doesn’t use an independent investment manager to help select and monitor investments, consider incorporating these risk management measures.

Overall Compliance

Some critical compliance questions to consider in your review are:

• Do your plan’s administrative procedures comply with current regulations?
• If it’s intended to be a participant-directed individual account plan, does it follow all the provisions of ERISA Section 404(c)?
• Have there been any major changes to other 401(k) regulations recently?

 
Along with testing the current state of your plan against ERISA requirements, evaluate whether your operational practices align with your plan document — an area where many sponsors stumble. Double-check key items such as contribution timelines, eligibility determinations, vesting schedules, and loan administration. Verify that procedures precisely follow the terms of your plan document.

Large plans must attach an independent qualified auditor’s report to Form 5500. Large plans are defined as a plan that has 100 or more participants with an account balance at the start of the plan year. As your plan approaches 100 participants, engaging the right auditor early is essential.

Great Power, Great Responsibility

A 401(k) plan is a highly valuable benefit that can attract job candidates, retain employees, and demonstrate your business’ commitment to participants’ financial well-being. However, with this great power comes great responsibility on your part as plan sponsor.

If your leadership team and key staff haven’t reviewed your organization’s plan compliance recently, year-end may be an ideal time to take stock. KPM’s team of advisors can help with your employee benefit plan audit, compliance, and third-party administrator needs. Contact us today.