Top Blunders Companies Make When Starting a Retirement Plan
1) Starting a retirement plan without knowing all the options. 401k, SIMPLEs, and SEPs, oh my! Each type of plan has strengths, weaknesses, and impacts your budget differently. Make sure you know and understand all of your options when selecting the plan type and long-term impact! Beware of payroll sales people who say "Would you like a 401k with that?" This is not McDonalds where you're adding fries to your combo meal.
2) Not reviewing the plan or the design of the plan. The retirement plan and your company will grow and change over time! As that happens, don’t fall into the trap of leaving the plan on auto-pilot. Revisit the plan periodically to make sure the plan design and type still fits your company as well as the employees.
3) Not being an informed buyer. Lots of vendors will gladly sell you a plan, but those vendors are not all created equal. Perform due diligence to prevent fraud (duh) but also to ensure the vendor is able to support you, your employees, and provide all the bells and whistles that best fit you. Partner with a retirement plan expert who can negotiate on your behalf and help reduce the noise. This is like buying a new car from the first lot you see without knowing there are other ones out there. Will it get you there? Yes. Will the ride be great? Only the salesman knows (and he's not telling).
4) Not realizing who is a fiduciary – and what that means. Not all retirement plan types have the same fiduciary responsibilities and liability. For example, if it has 401k in the title it has the highest level of responsibilities and liability, but that doesn't mean that DOL doesn't get upset about SIMPLEs and SEPs. No matter which type of plan you choose, you are in a position of trust with other people’s money. It's imperative that you understand your and your staff's duties and responsibilities, and how to get help in fulfilling your obligations.