A business’s 321 fiduciary can end up playing several roles. Not only are they expected to act as an advisor, but they also help manage the business’s 401(k) program, mediating between the company and its plan sponsor.
Once a business agrees to adopt a particular plan, it becomes the responsibility of a plan administrator to enroll employees. But not all workers will want to participate and those who do will likely have questions, so make sure you have written regulations in place before explaining the plan and accepting signups. Here are a few things to know about eligibility if you’re in charge of your business’s 401(k) plan.
Eligibility is an important part of setting up a 401(k). It can be tempting to make requirements as flexible as possible so every employee can participate. However, doing so can drive prices up and hurt everyone, including your business, and can make daily administration extremely complicated. But on the other hand, strict requirements may drive employees to a competitor with a 401(k) that includes them.
Decide whether part-time or seasonal employees are allowed to participate. For all salaried employees, set a minimum time of employment before new hires will be eligible. If you have high turnover, setting this time limit too short could cost your business any match money it contributes. However, a long service requirement could make your company a less attractive choice.
Before enacting parameters, a 321 fiduciary should be aware of any laws relating to 401(k) plans. In addition to regulation compliance, set up participation requirements that help drive risk management and keep you competitive. In doing so, your plan will take care of your business’s employees without putting an administrative burden on the business itself.
FiduciaryFirst is a Maitland, Florida based company that provides independent retirement plan fiduciary support with a holistic approach. Our comprehensive Prudent Fiduciary ProcessSM (PFP) enables employer groups to address fiduciary standards. For more information about pension consulting call us at 866-625-4611 or contact us online.
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This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.