Plan Sponsors’ Five Deadly Sins By JOHN SCHAFER, Vice President, National Leader, Financial Institutions Channel, Pentegra Despite all the 401(k) media attention and national plan fiduciary discussion, plan sponsors continue to make very common mistakes year after year that are relatively easy to identify, fix and avoid with the right help. Mistakes can be opportunities to improve existing retirement plans for the better, but they can also be costly.w And it’s costing plan sponsors a bundle. The Employee Benefits Security Administration (EBSA) unit restored over $1.4 billion to employee benefit plans, participants and beneficiaries in FY 2023.1 A vast majority of the Voluntary Fiduciary Correction Program (VFCP) submissions were from oversights and omissions from unknowing plan sponsors. At the core of the problem is the assumption by many that plan sponsors understand their role as plan fiduciaries when, in fact, many are very uninformed. As retirement plan advisors, you are in a unique position to offer some non-fiduciary value-added educational services to help ensure an insignificant plan administration error does not grow into something more complicated and expensive. The fact that the same errors occur every year means there’s an opportunity to strengthen your value proposition and differentiate yourself from your competition by helping create risk-avoidance strategies. You can help clients and prospects save time and money by educating them on fiduciary exposure and how it can be reduced. Fortunately, both the Internal Revenue Service (IRS) and the DOL have established programs that allow self-correction of these types of mistakes. Under the IRS self-correction programs, most errors can be fixed without notifying the agency or paying a fee. Like the IRS, the DOL’s programs are simple and relatively inexpensive. Get started by focusing on the top five mistakes and make an impact on your clients’ bottom line by helping them identify, fix and avoid these costly errors: 1. Failure To Update Plan Documents: By far, the most common mistake plan sponsors make is failing to update their plan documents to reflect recent changes in the law in a timely manner. The IRS urges plan sponsors to review their plan documents annually and maintain regular contact with their plan provider. They also suggest a “reminder” system to automatically notify plan sponsors when changes must be completed. 25 WEST VIRGINIA BANKER
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