Responsibilities of Small & Medium Businesses for Employee Retirement Plans

Posted: Sep 20, 2021 2:12:18 PM

Employer Responsibilities for Retirement Plans

Offering your employees a retirement plan will help you attract and retain good workers. Whether you currently offer your staff a 401K plan or other form of retirement plan, or are thinking of starting one, you may not be totally aware of your responsibilities. So what are your responsibilities as a small or medium-sized business offering retirement plans?

Basic Responsibilities of Employers for Retirement Plans

First and most obviously, as a plan sponsor of a retirement plan you need to be in compliance with all IRS regulations and the Internal Revenue Code. If you're not sure what these are, you can easily find out what your obligation is by calling GGA Retirement.

You'll also need to know what features are in your adoption agreement . Rules change, check to see if the  features selected still apply to your employees.

Knowing your plan's coverage is essential to avoiding problems.  

Retirement Plan Administrators and Advisors 

There is a lot of work that needs to be done to keep your 401k plan working for your employees and ensuring that you’re in compliance. 

Many companies hire outside plan administrators that are an ERISA 3(16) fiduciary, responsible and liable for the day-to-day operations of your plan. This includes recordkeeping and processing of employer contributions, investments and withdrawals, as well as keeping employees informed. 

Another consideration for hiring a plan administrator is that professional plan administrators are aware of the laws and regulations of retirement plans.  

Plan administrators do not normally make investment decisions. Companies often also hire professional investment advisors to manage how retirement plan assets are invested. There are two types of advisors that can select and maintain investments. 

A Section 3(21) advisor provides a fund line up, but the employer still makes the investment decisions and is ultimately responsible. 

A Section 3(38) investment manager not only selects investments, but also takes on the liability. This may be a better option if you are unfamiliar with or don’t have time for investment management.

Either way, staying in communication with your plan providers is key to being successful in navigating any retirement plans you offer employees. You'll want to stay updated so that if things change, you can take immediate action to help your business and employees.

Consider a 401K PEP 

You may want to consider participating in a 401K PEP instead of sponsoring a traditional 401K plan. A 401K PEP, or Pooled Employer Plan, allows companies to pool their retirement plans with other companies and are managed by registered Pooled Plan Providers. 

PEPs were passed into law in January of 2021. Small and medium-sized employers can benefit from them as they allow companies to achieve larger economies on their own much faster than traditional 401Ks.

401K PEPs also reduce liability for businesses and can potentially lower total costs, along with reducing overall workload and providing more investment options. The bottom line is that PEPs are making it possible for some employers to offer retirement plans with better options and lower liability for the first time.

How Can a 401K PEP Benefit Your Business?

With a PEP, your business will likely transfer many of its financial and administrative responsibilities to the plan provider. This can lead to lower administrative costs overall, meaning your business could benefit significantly. 

GGA Retirement is a Pooled Plan Provider and 3(38) fiduciary of 401K PEP. We provide solid fiduciary protection, managed portfolios and an online engagement tool for employers. Read more about our work with company retirement plans by clicking below, or contact us today. 


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