By Craig Eissler, CFP®, CIMA®, AIF®, PPC® Wealth Advisor
As a business owner, offering a 401(k) plan is a powerful way to attract and retain talent, support your employees’ financial futures, and demonstrate your commitment to their well-being. Conducting an annual 401(k) review helps ensure your plan remains compliant, competitive, and aligned with your company’s goals.
In fact, 82% of employers say offering a 401(k) or similar plan is important for attracting and retaining employees.
A thoughtful review starts with asking the right questions—questions that reveal how the plan is performing and where improvements are needed. Below are eight key areas business owners should review annually to be a good steward of their company’s retirement plan. Additionally, we’ve created a simplified checklist to help you prepare for annual 401(k) reviews, which can be downloaded here.
Participation Trends
Are your employees actively participating in the plan? Is the participation rate improving year over year? If participation is low or stagnant, it may be a sign that employees need more transparent communication, easier enrollment processes, or more education about the potential benefits. In some cases, adjusting the plan design—such as adding automatic enrollment—can help encourage participation and support employees in taking steps toward long-term savings.
Plans that use automatic enrollment average participation rates are around 90%, compared to roughly 60% among plans where employees must actively opt in. This shows a simple reality: when enrollment is the default, more people participate.
Beneficiary Designations
Are participants regularly updating their beneficiary forms? This is an often-overlooked detail with major implications. Employees experience life changes such as marriage, divorce, the birth of a child, or death in the family, and beneficiary information should reflect those changes. If no beneficiary is on file, default plan rules apply, which may not align with the participant’s intentions. A yearly reminder to review beneficiary forms can help prevent costly and emotional conflicts later.
Regular Committee Meetings
Have you held a 401(k) committee meeting recently? Regular, documented meetings are a core part of demonstrating that the plan is being actively monitored. About 75% of retirement plan committees meet with their plan advisor quarterly, and another 13% meet semi-annually, highlighting the expectation for a consistent review cadence. Meeting notes should reflect discussions around investments, fees, service providers, and any decisions being considered. This is a key component of fiduciary oversight and can help protect the business in the event of an audit or inquiry.
Employee Education
When was the last time your employees received education about the plan? Do you have a copy of the materials presented? Employees are more likely to use their 401(k) effectively when they understand how to enroll, choose investments, and how contributions impact their financial goals.
Nearly 90% of employees say they would be more likely to stay with employers offering financial education. Education can take the form of live workshops, short videos, or one-on-one sessions with a financial advisor. The goal is to make the plan approachable and encourage positive participation.
Plan Fees
Do you know the total cost of your plan? Have you reviewed fees in the last three years? Understanding your plan’s fees is essential to making sure your employees aren’t overpaying for services. Reviewing and comparing fees every few years can reveal opportunities to reduce costs or improve value. Even a 1% difference in fees can reduce a participant’s retirement balance by nearly 28% over the course of their career, which illustrates how important oversight can be.
Investment Options
Is your plan advisor regularly reviewing the investment lineup? Are there too many or too few options? Your plan should offer appropriate diversification without overwhelming participants. It’s also important to confirm that your Qualified Default Investment Alternative (QDIA) is aligned with your workforce’s demographics and needs. Investments should be reviewed regularly to monitor performance and determine whether they continue to serve participants effectively.
Fidelity Bond Coverage
Does your plan’s fidelity bond cover at least 10% of plan assets? This bond is required under ERISA and is meant to protect your plan from losses due to fraud or dishonesty. If the bond amount is too low or missing, it can flag your plan for a Department of Labor audit. In many cases, the time and cost of responding to an audit are far more expensive than simply maintaining the proper bond in the first place. Overlooking this can lead to issues, even if the plan is otherwise well-managed.
Compliance Testing
Has your plan failed any nondiscrimination tests? If so, it may be time to review your plan design. This can lead to required refunds or corrective contributions. Reviewing plan structure can help address these issues and create a more equitable benefit for all employees.
An annual 401(k) review isn’t just a best practice—it’s a fiduciary obligation. By taking the time to assess these areas, business owners can verify their retirement plan is compliant, cost-effective, and beneficial for their employees. Download your annual 401(k) checklist here and reach out to a Halbert Hargrove advisor today to discuss your 401(k) plans.
Disclosures:
Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser with its principal place of business in Long Beach, California. HH may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. Registration does not imply a certain level of skill or training. For information pertaining to the registration status of HH, please contact HH or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov). Additional information about HH, including our registration status, fees, and services can be found at www.halberthargrove.com.
This blog is provided for general information purposes only. No portion of the content serves as the receipt of, or as a substitute for, personalized investment advice from HH or any other investment professional of your choosing. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. It should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither HH’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if HH is engaged, or continues to be engaged, to provide investment advisory services. HH is neither a law firm nor accounting firm, and no portion of its services, or this content, should be construed as legal or accounting advice. No portion of this content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if HH is engaged, or continues to be engaged, to provide investment advisory services. All opinions or views reflect the judgment of the author as of the publication date and are subject to change without notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted.
