When you’re crafting a benefits package, it’s easy to focus on health insurance, PTO and salary to ensure you can attract and retain good employees. But for many employees, retirement benefits are an important part of the equation, too. And for employers, having a 401(k) is not only to benefit the founders and leadership team but also the employees.
As your company grows, your plan design needs to keep up. The prototype plan your CPA managed that worked when you had 15 employees may not make sense at 50. Payroll changes, employees come and go and compliance requirements cannot be ignored. Annual filings, the 5500 form and compliance testing all need to happen.
For a growing company without an internal HR team, that can quickly become one more important responsibility that nobody is really managing. That’s why we encourage companies to periodically look beyond the match and ask a bigger question: Is your current 401(k) plan structure still working for your company today?
The Match Is Only One Part of the Plan
An employer match can make your benefits package more attractive and encourage employees to participate in the plan. It can also help smaller and growing companies compete for talent against organizations with much larger benefits budgets. But deciding to offer a match is only the beginning.
How the match is structured can have financial and compliance implications for the company. For example, some employers use a Safe Harbor 401(k) plan, which requires specific employer contributions and, when structured and operated correctly, can allow the plan to avoid certain annual nondiscrimination testing.
That can be particularly important for smaller companies where participation rates between highly compensated employees and the rest of the workforce can create challenges under a traditional 401(k).
This is where having the right HR and retirement plan expertise matters. Your match should not simply sound competitive. It should make sense within your overall plan design, budget, admin capabilities and compliance strategy.
A 401(k) Is Not a “Set It and Forget It” Benefit
One of the mistakes we see growing companies make with HR programs and benefits is assuming that because something was set up correctly several years ago, it is still the right solution today. Companies change.
You may have added employees in various states at various levels. Your payroll and accounting platforms may have changed, your comp structure may have evolved and your leadership team may be contributing differently than the rest of the workforce. You may also have outgrown the level of service your provider offers – especially is that is your CPA.
And there are ongoing 401(k) responsibilities that need to happen behind the scenes to ensure your plan is compliant and your employees are contributing. Depending on your plan, that can include:
- Coordinating contributions correctly with payroll
- Monitoring employee eligibility and enrollment
- Reviewing employer contributions and match calculations
- Completing required annual testing
- Providing required employee notices and disclosures
- Filing the appropriate Form 5500 each year
- Reviewing plan fees and investment options
- Keeping plan documents current
- Managing questions, distributions and other employee needs
- Monitoring the providers supporting the plan
When you don’t have a strong internal HR team, it’s easy for responsibility for these items to become fragmented between the owner, finance, payroll and the 401(k) provider. That’s when things can fall through the cracks.
Know What Your Provider Handles and What You Still Own
Not every 401(k) provider offers the same level of support. Some provide a highly integrated experience and handle much of the plan administration. Others leave significantly more responsibility with the employer or require coordination with additional third-party administrators and advisors. Before assuming “our 401(k) company handles that,” make sure you know exactly what that includes.
Who prepares your annual Form 5500? Who makes sure it is filed on time? Who handles compliance testing if your plan requires it? Who monitors eligibility? Who communicates required notices? Who catches an issue if payroll contributions do not match the plan documents? And perhaps most importantly: Who inside your company is responsible for making sure all of those things actually happen?
Outsourcing pieces of your 401(k) administration does not necessarily eliminate the employer’s responsibilities. Someone still needs to oversee the plan and the providers supporting it.
Don’t Overlook the Employee Experience
Compliance matters, but so does whether employees actually value and use the benefit.
Can employees easily enroll? Do they understand the company match and does it really help with retention? Is the platform easy to navigate? Can they get help when they have questions? Are new employees learning about the benefit during onboarding?
A benefit can be expensive for the company and still provide very little recruiting or retention value if employees don’t understand it. That is why we look at retirement benefits as part of a company’s broader people strategy. The goal isn’t simply to offer a 401(k). It is to offer a benefit that works operationally, makes sense financially and provides real value to employees.
When Was the Last Time You Reviewed Your Plan?
If you’ve had the same plan and provider for several years, that doesn’t necessarily mean you need to make a change. But it does mean it may be time for a review. Consider looking at:
- Your current employer match and overall plan design
- Whether Safe Harbor or another plan design should be considered
- Employee participation and contribution rates
- Eligibility and enrollment processes
- Investment options and plan fees
- Payroll integration and contribution processes
- Annual testing and compliance requirements
- Form 5500 preparation and filing
- Required employee communications
- Employee and employer support
- The service you receive from your current provider
- Whether the plan can continue to support the company as you grow
An experienced HR partner can help bring the pieces together, identify questions that need to be asked and work with your 401(k) provider, payroll company and other advisors to make sure responsibilities are clear. That is especially valuable for smaller companies that don’t have a benefits specialist or experienced HR leader internally.
Finding the Right 401(k) Partner
The provider matters, too. We recently welcomed Betterment as a Hire Ventures partner. Betterment works with businesses to set up and administer 401(k) plans while providing employees with a straightforward way to manage their retirement savings. But there is no single provider that is right for every company.
When we help clients evaluate HR vendors and benefits, we look at the business first. What does the company need? What level of support does the internal team have? How well does the solution integrate with payroll? What responsibilities will remain with the employer? And will the solution still work as the company grows?
You can learn more about Betterment and the other organizations we work with on our Partners page.
Your Benefits Should Grow With Your Business
All this said, your 401(k) match matters and is part of ensuring your 401(k) plan is doing what you need it to do. For growing businesses, benefits, payroll, compliance and HR become more complicated as the company grows. You shouldn’t have to become an expert in every one of them.
At Hire Ventures, our Fractional HR team helps growing companies evaluate and manage the people side of the business, including benefits, compliance, HR systems and the partners supporting them. Sometimes that means helping build something new. Sometimes it means taking a fresh look at something that has been in place for years.
Either way, the goal is the same: make sure your HR programs still work for the company you are today and the company you are becoming.
