A 401(k) plan is one of the most powerful benefits you can offer your employees. It not only supports their long-term financial security but also helps you attract and retain top talent. However, sponsoring a retirement plan also comes with significant compliance responsibilities. And it’s rarely a single error that causes problems, but rather a slow build-up of overlooked details, including delayed deposits, missed eligibility updates, and outdated documents.
The key to success is maintaining 401(k) plan compliance year-round, not just scrambling during filing deadlines or after an IRS or Department of Labor (DOL) notice. A consistent, year-round approach creates space for clarity, not chaos. When retirement planning is handled thoughtfully, it not only protects the business but it reinforces trust where it matters most. For many plan sponsors, this realization is the turning point.
Know Your Fiduciary Responsibilities
As a plan sponsor, you are considered a fiduciary. This is a role that carries legal accountability and a deeper responsibility to act in the best interest of plan participants. Many sponsors underestimate how their day-to-day decisions, such as selecting investment options, monitoring fees, or approving plan changes, tie back to fiduciary duty. A fiduciary’s responsibilities might also include:
- Ensuring investment options are diversified and appropriate
- Monitoring fees and expenses to confirm they are reasonable
- Avoiding conflicts of interest
- Following plan documents and ERISA regulations
Roles that aren’t clearly defined or responsibilities aren’t regularly revisited, mistakes often follow. A well-informed fiduciary structure, one that’s supported by internal committees, documented decision-making, and regular training, creates clarity. It gives everyone involved a framework for action and accountability. And over time, that clarity can prevent missteps, reduce audit risk, and strengthen trust across the organization.
Stay Updated on Regulatory and Legislative Changes
Retirement plan rules evolve regularly. Recent years have seen sweeping updates, including the SECURE Act, the SECURE 2.0 Act, and shifting IRS contribution limits. Each change can impact your plan design, eligibility, or administrative requirements.
Furthermore, adjustments to IRS contribution limits, DOL guidance, or eligibility rules can alter how a plan operates, even if nothing visibly changes on a day-to-day basis. Often, it’s not the existence of a rule that causes trouble, but the delay in recognizing it. When updates go unnoticed, plans can inadvertently operate under outdated terms, leaving sponsors exposed.
Building a habit of periodic review, including monthly check-ins, quarterly advisor meetings, or annual legal updates, helps keep the plan aligned with current standards. It also reduces the need for last-minute corrections, which are more costly and stressful.
Conduct Routine Plan Reviews
Once a plan is aligned with current rules, the next step is operational consistency. Over time, assumptions form, systems evolve, and small deviations from the plan document may go unnoticed. A routine review confirms what’s working, and it helps surface what’s not.
These reviews can include checking participant eligibility, validating payroll data, or confirming loan and hardship withdrawal processes. Simple cross-checks, like comparing payroll systems against plan definitions of compensation, can uncover issues before they become audit findings.
Reviews that are scheduled, documented, and revisited regularly provide an added layer of protection. More importantly, they offer peace of mind that the plan is compliant and functioning the way it was intended to.
Verify Timely and Accurate Contributions
Contribution timing is one of the most common areas where plan sponsors run into compliance trouble. It’s also one of the most preventable. Regulations call for employee contributions to be deposited as soon as they can be reasonably separated from company assets. For smaller plans, there’s a seven-business-day safe harbor, but even that can become a gray area without a clearly defined process.
What tends to cause delays isn’t negligence, but inconsistent payroll systems, unclear handoffs, or missed steps in the process. Setting up internal reminders, automating where possible, and reviewing deposit timing regularly can create consistency.
Accuracy matters, too. Every deferral should reflect the correct compensation definitions outlined in the plan document. And since small errors, repeated over time, tend to leave the biggest mark, early detection and reliable systems can make this part of plan administration feel routine instead of risky.
Communicate Clearly with Plan Participants
Participants rely on accurate, timely information to make meaningful decisions about their retirement savings. Yet, communication breakdowns are common, such as missed notices, unclear enrollment instructions, or outdated summaries. These can create confusion and erode trust. Even well-run plans can fall short if participants don’t fully understand how to access or manage their benefits.
Clear, consistent communication is not only a best practice, but a shared responsibility under fiduciary duty. This includes distributing notices on time, offering plain-language explanations of plan features, and making fee disclosures accessible. It also means creating space for questions and support, whether that be through HR, a third-party administrator, or an advisor.
Informed participants are more likely to engage. And that engagement strengthens the overall success of the plan.
Review and Oversee Third-Party Administrators
Many plan sponsors rely on third-party administrators (TPAs) to manage day-to-day operations, but outsourcing doesn’t remove fiduciary responsibility. Sponsors remain accountable for the decisions and performance of the service providers they hire.
Common issues, like incorrect eligibility tracking, late filings, or misapplied plan rules, can often be traced back to miscommunication or assumptions between the sponsor and the TPA. Periodic reviews of service agreements, documented expectations, and consistent performance monitoring help keep everyone aligned. Asking the right questions and maintaining open communication can uncover problems before they become compliance issues.
The most effective sponsor-administrator relationships are collaborative. When both sides understand their roles, the plan runs more smoothly, and the risk of surprises diminishes.
Maintain Thorough Documentation for Compliance
Good documentation tells the story of a well-managed plan. It captures decisions, tracks responsibilities, and provides a record that supports both internal oversight and regulatory review. Yet, it’s often treated as an afterthought… stored across email threads, forgotten folders, or outdated systems.
Organized, accessible documentation does more than check a box. It allows plan sponsors to demonstrate how fiduciary duties are fulfilled, how updates are implemented, and how errors are identified and corrected. This includes maintaining signed plan documents, meeting minutes, amendment records, and communications tied to participant decisions.
When questions arise (during an audit or after a staff transition), strong records prevent confusion. They create continuity, even when personnel or processes change. At DHJJ, we encourage clients to view documentation as “proof of prudence.” Even if your decisions are sound, you’ll need evidence to show how and why they were made.
Making Compliance Manageable with the Right Partner
Maintaining 401(k) plan compliance year-round may sound daunting, but when broken into routine, proactive steps, it becomes far more manageable. The real challenge for business owners is finding the time and expertise to oversee all aspects while still focusing on running their company.
Need support maintaining 401(k) compliance across the year, and not just at tax time? DHJJ helps plan sponsors navigate their fiduciary responsibilities through thoughtful planning, internal process reviews, and independent retirement plan audits. We work closely with you, your TPA, and other service providers to help uncover risks, validate compliance, and support your role as a responsible plan sponsor.
Let’s start a conversation about how DHJJ can help you stay ahead, both clearly and consistently.
