Plan Sponsors who regularly monitor benefits will often find the need to make a 401k provider change which impacts all plan participants and retirees. In business, change can be time-consuming, resource-consuming, painful and costly for the entire workforce. The question that no one knows the answer to, at the onset of a 401k provider change, is, “will the outcome be worth the effort?”
During a recent Fiduciary Education Program of The Plan Sponsor University (TPSU) a plan sponsor shared a story of how they, as plan fiduciaries, identified a flaw in their own 401k plan, isolated the problem and then worked through to a solution.
Nontraditional Source of Plan Improvement
In this case the existing 401k provider was a payroll company. The 401k plan had been with the payroll company over 5 years and the there had been very little interaction between the plan sponsor and the 401k provider. The plan sponsor was not aware of any major or even minor problems with the 401k plan. The 401k provider had been holding annual group 401k meetings with employees over the years and the executive team of the company assumed that the plan was performing at a satisfactory level since inception.
When word of “switching payroll” to a new company reached the staff, the employer received extensive inquiries and unsolicited comments from plan participants concerning the dissatisfaction over how the 401k plan had been handled and was performing. The company executives took this information seriously due to the press coverage surrounding high profile and high dollar court cases and settlements involving 401k plan foibles.
In this case the company formed a Task Force to address their known-issues and to identify their unknown-issues- which executives felt existed. This Task force of 3 employees took two weeks to “set a plan for their plan” as it was described at the TPSU Program. The Task Force determined that a Retirement Committee need be formed, Communication with Employees (not just participants) was to become a priority over the next 60 days) and that moving the company payroll was a lower priority than was addressing the administration of the 401k plan.