The Hidden Dangers Lurking in Your Company’s Retirement Plan

As advisors who regularly review retirement plans with business owners, we’ve seen countless plans that fall short of their potential. Common issues include business owners missing valuable tax advantages, plans failing to meet ERISA compliance guidelines, serious fiduciary oversights, poor participant communication leading to reduced contribution rates, and advisors lacking specialized 401(k) expertise. Here are six critical questions we help work through with clients when evaluating existing plans.

1. Are You Getting What You’re Paying For?

Understanding your retirement plan’s true costs is more complex than it might seem. Many business owners we talk to are surprised to learn about:

• Hidden fees buried deep in service provider agreements that significantly impact overall plan costs
• The comprehensive breakdown of plan administration expenses, including both direct and indirect costs
• How their plan’s fee structure compares to industry averages for similar-sized businesses
• Whether their current investment options and services justify the expenses

A thorough review of your Service Provider Fee Disclosure provisions (ERISA 408(b)(2)) can reveal opportunities for cost optimization while maintaining or improving service quality.

2. How Protected Are You as a Fiduciary?

As a plan sponsor, you are automatically a fiduciary – a role that carries significant legal responsibilities and potential personal liability. Key areas to evaluate include:

• Whether all plan fiduciaries have formally acknowledged their roles in writing
• Understanding and avoiding “prohibited transactions” that could create personal liability
• Maintaining proper documentation of investment decisions and monitoring processes
• Working with a plan advisor who serves as a co-fiduciary to share responsibility and risk
• Whether your current advisor actively helps you meet fiduciary guidelines through regular reviews and updates

Without proper fiduciary oversight and documentation, you could be exposed to unnecessary personal and business risk.

3. Have You Defined What Success Looks Like?

A successful retirement plan needs clear objectives and regular monitoring. Essential elements include:

• Specific, measurable goals for participation rates and contribution levels
• Regular evaluation of investment options to ensure appropriate asset allocation across all categories
• Effective participant communication strategies about investment options and plan features
• Quarterly investment monitoring with proper documentation
• Clear metrics for measuring plan success, from enrollment rates to participant engagement
• Annual trustee meetings to review success metrics and make necessary adjustments to keep the plan on track

4. Are Your Employees Making the Most of Your Plan?

The true measure of a retirement plan’s success goes beyond mere participation rates. Consider:

• Whether your education program effectively reaches and engages at least 90% of eligible participants
• If employees truly understand and utilize the full range of plan features and investment options
• Whether participation and contribution rates align with your established goals
• How effectively employees are using the plan as part of their comprehensive retirement strategy

Low engagement or understanding might signal the need for a more strategic approach to plan communication and education.

5. Is Your Plan Meeting All ERISA Requirements?

Compliance isn’t a one-time checkbox—it’s an ongoing process requiring regular attention. Key considerations include:

• Conducting and documenting annual employee and trustee meetings
• Receiving and acting on regular compliance updates and guidance
• Implementing tools and checklists to monitor fiduciary responsibilities
• Ensuring all plan changes are properly documented and updated
• Following ERISA guidelines consistently and comprehensively

Missing any of these elements could expose your company to significant regulatory risk.

6. What Are Your Plan’s Blind Spots?

Even if your plan appears to be running smoothly, there might be opportunities for improvement in:

• Employee education and engagement strategies
• Investment options and performance metrics
• Fee structures and service provider value
• Plan features and benefits compared to industry standards
• Implementation of best practices from similar successful plans

Moving Forward: Taking Action

If these questions raised concerns about your current retirement plan, you’re not alone. Many business owners find themselves questioning whether their plan is optimally structured for both the company and employees.

A well-managed retirement plan should:

• Have clear, documented goals and objectives
• Include regular investment monitoring with proper documentation
• Provide comprehensive employee education and engagement programs
• Maintain thorough compliance documentation
• Deliver demonstrable value for costs
• Protect fiduciaries through proper oversight and risk management
• Be managed by advisors with specific ERISA and retirement plan expertise

How Freedom Financial Can Help

At Freedom Financial, we conduct comprehensive plan audits to help you answer these critical questions and identify areas for improvement. For all plans we manage, we provide:

• Regular meetings to discuss plan performance and necessary adjustments
• Updates on new legislation and regulatory changes
• Ongoing monitoring of plan success metrics
• Support for meeting fiduciary responsibilities
• Employee education and engagement programs
• Cost and performance analysis

Your Next Steps: The Plan Audit

Consider taking these actions:

• Undergo a comprehensive plan audit covering all key areas discussed above
• Review your current plan documentation and fiduciary protection measures
• Evaluate your employee education program effectiveness
• Analyze your plan’s costs and performance metrics
• Compare your plan features and results to industry standards

Ready to ensure your retirement plan is working as hard as you are? Our team specializes in helping business owners optimize their retirement plans for better results, stronger compliance, and reduced risk.

Call us today at (651) 797-3532 to schedule an initial discussion and complimentary audit of your current plan. Let us help you identify opportunities to strengthen your retirement plan and better serve your employees while protecting your business.