As a plan sponsor, competing for and hiring talent in today’s job market is challenging. But now you’ve finally found and hired that one key employee you’ve been searching for. Time to tell your new hire about all the benefits of working for your company, including your 401k plan.
It’s pretty common for plan sponsors to tell new hires about the company 401k plan. But how is this communication documented? There are a few easy ways plan sponsors can document they have informed new hires about their eligibility to participate in the 401k plan:
1. Using a new hire checklist. Make sure that as part of the onboarding process at your company, your HR department is using a checklist to ensure key information has been communicated to each new hire. Information about the company 401k plan should be a key item on the new hire checklist. The HR department and new employee should both sign the checklist to acknowledge all information has been provided to the new hire. Then keep the checklist in the employee personnel file.
2. If your company conducts separate orientation meetings about your 401k plan, make sure you keep signed attendance sheets for all employees in attendance.
3. If your company’s policy is to inform each employee on an individual basis as they become eligible for your 401k plan, your HR department should maintain signed forms indicating employee acknowledgement they have been informed of their eligibility to participate, how to sign up, or what website to go sign up.
Some other key items to consider which are related to making sure employees are timely informed of their eligibility to participate in your 401k plan:
– Employers should have have processes in place to track and remind employers when they become eligible to participate.
– Employers should periodically remind non-participating employees about the plan and how to participate.
– Implement auto-enroll for your plan for new hires.
– Periodically auto-reenroll non-participating employees.
As a 401k auditor, I like to see evidence that key controls are operating. The above are simple yet very effective ways to document your company is properly informing employees about your 401k plan.
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