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Steps to Effectively Manage Your Business’s 401(k) Plan
Michel Knott
Managing a 401(k) plan for your business can be challenging, especially when former employees leave their savings in your plan. While this might be convenient for some former employees, it may not always be beneficial for your business. Smaller balances can lead to higher fees and/or expensive annual audits, which is particularly burdensome for small businesses. Here are some steps you can take to mitigate this issue:
1. Review Your Participant Roster Annually
- Identify former employees with balances in your plan.
- For those with small balances (under $5,000), use a "force out" provision to move their savings to an IRA.
- Ensure your plan includes this provision and provide the necessary notifications to former employees.
2. Communicate with Former Employees
- Conduct an outreach campaign for those with larger balances, encouraging them to roll over their funds to an IRA or a new 401(k) plan.
- Clear communication can help reduce the number of inactive accounts in your plan, ultimately lowering your administrative burden and costs.
3. Follow Up on Unreachable Employees
- Use certified mail to contact former employees.
- Check all your records for updated contact information.
- Reach out to designated beneficiaries if you cannot contact a former employee.
- Utilize free online search tools, such as LinkedIn, public records databases, and search engines, to try to locate the individual.
Taking these steps not only helps manage your 401(k) plan more effectively but also reduces unnecessary costs associated with maintaining accounts for former employees.
For further assistance with managing your 401(k) plan or other related matters, don't hesitate to contact our business. We are here to help your business every step of the way.
