2025 401(k) Plan Compliance Guide: Fiduciary Oversight, Fees, and Administration
If your business sponsors a 401(k) plan for employees, managing it is more than a formality — it’s a legal responsibility. Under the Employee Retirement Income Security Act (ERISA), plan sponsors have a fiduciary duty to act prudently and solely in the best interest of participants.
Even after launching a plan, ongoing oversight is essential. Problems can arise without active management, even when a third-party administrator (TPA) is involved. With 2025 winding down, now is a perfect time to review your plan’s administrative processes and fiduciary procedures.
Investment Selection and Management
Evaluate your plan’s investment options to ensure they meet the needs of your employees:
- Are there choices across the risk-and-return spectrum for employees of all ages?
- Are premixed funds based on age or expected retirement date appropriate for your workforce?
- Does the plan have a default investment for participants who haven’t directed contributions, and is it still suitable?
If your plan lacks a written investment policy or an independent investment manager, consider implementing these risk management measures.
- Engage an investment manager only after establishing documented procedures for selecting and monitoring them.
- Review current engagement documents with your attorney to ensure accuracy and compliance.
Fee Structure
401(k) plan fees can attract scrutiny from employees and media. Take these steps to evaluate costs:
- Calculate participant fees for all plan investments and benchmark against industry standards.
- Examine administrative, recordkeeping, and advisory fees, noting how they are allocated between your business and participants.
- Review any revenue-sharing arrangements for transparency and oversight.
- Compare your total plan costs with similar-sized plans to ensure competitiveness and fairness.
Third-Party Administrator (TPA) Oversight
Even if your TPA manages daily operations, periodic verification is crucial:
- Confirm they maintain proper documentation.
- Ensure timely and accurate reporting practices are followed.
- Verify they provide adequate support for compliance questions.
Regular reviews help protect your business from operational errors, data breaches, or outdated administrative practices.
Overall Compliance Review
Ask these key compliance questions:
- Do your administrative procedures comply with current regulations?
- Does your plan meet ERISA Section 404(c) requirements if participant-directed?
- Are there recent changes to 401(k) regulations that affect your plan?
Check that operational practices align with your plan document, including:
- Contribution timelines
- Eligibility determinations
- Vesting schedules
- Loan administration
Periodic internal audits can uncover inconsistencies, operational errors, or even fraudulent activities before they become costly compliance failures.
Great Power, Great Responsibility
A well-managed 401(k) plan is a powerful tool for attracting and retaining employees while demonstrating your business’s commitment to financial well-being.
Year-end is the ideal time to:
- Review oversight practices
- Identify plan costs and fees
- Spot potential compliance gaps
- Strengthen internal controls
Professional guidance can help ensure your 401(k) plan remains compliant, cost-effective, and beneficial for employees.