The world of retirement plans for small Businesses is a confusing one, with lots of options, lots of costs, and seemingly endless different opinions on what the right plan is.  One thing is for sure, with a small business 401(k) plan, there are lots of rules, and lots of penalties facing the Plan Sponsor if those rules aren’t followed.

In this article written by Ary Rosenbaum we learn a few “things that they never tell you as a 401(k) Plan Sponsor”; since there is rarely a set of instructions given.

1 – You’re always on the hook for liability.  If you have an advisor telling you that you don’t have any liability, you might want to get a second opinion.  There are certain things a business owner can do to reduce liability, but it’s almost impossible to completely shield yourself.

2 – Even if participants select their own investments, you still may be at fault.  You need to make sure the investment options are sound and that the employees have enough information to make a decision.  This may involve more education that simply providing a prospectus.

3 – That fiduciary warranty may be worthless.  These tend to be very broad and only defend you in rare circumstances.  While they provide some value, they shouldn’t make a Plan Sponsor feel as though they are fully covered.

A 401(k) Plan can be an important tool for a small business to attract and retain employees.  When administered correctly they should not pose much of a risk to the Plan Sponsor, but we have seen and heard too many stories of Small Business Owners getting in trouble for issues they could have avoided.  It is critical to make sure you are partnering with an advisor who specializes in 401(k).  There is risk involved in sponsoring a 401(k) Plan.  It’s important to work with an advisor who knows the risks involved, shares them with you, and works to protect you.

If you have questions or would like to learn more about 401(k) administration please reach out to Genesis HR Solutions at or 800-367-8367.

Genesis HR Solutions is the premier PEO provider for Massachusetts based businesses.