Don't Delay, Inform Today! Why Promptly Notifying Your TPA About 401(k) Trustee Changes is Crucial

As a business owner or HR manager overseeing your company's 401(k) plan, you understand the importance of smooth administration and compliance. One seemingly minor detail that can have significant downstream effects is a change in your plan's trustee. While it might feel like an internal administrative update, a plan amendment is required, and failing to promptly inform your Third-Party Administrator (TPA) about a trustee change can lead to delays, errors, and even compliance issues.

Think of your TPA as the engine that keeps your 401(k) plan running efficiently. They handle ensuring compliance with IRS and DOL regulations, and overseeing plan activity in general. For them to perform these duties accurately and on time, they need to have the most up-to-date information about your plan, and that includes who the authorized trustee(s) are.

Why the Urgency? The Ripple Effect of Delayed Notification

Failing to notify your TPA or asset custodian promptly about a trustee change can create a cascade of problems:

• Delayed Transactions: Many 401(k) plan actions require trustee authorization. If your TPA or asset custodian doesn't have the updated trustee information, they won't be able to process important transactions like distributions, rollovers, or loan requests.

• Incorrect Documentation: An amendment is required to change a trustee, even if that trustee was an employee and terminated employment. Official plan documents, amendments, and government filings require accurate trustee information. Delaying notification can result in incorrect paperwork being generated, potentially leading to compliance issues down the line.

• Communication Breakdown: Your TPA needs to know who the authorized contact person is for important plan-related decisions. Without the correct trustee information, they might reach out to the wrong individuals, causing delays in communication and decision-making.

• Potential Compliance Issues: The Employee Retirement Income Security Act (ERISA) places specific responsibilities on plan fiduciaries, including trustees. Accurate trustee information is essential for demonstrating proper oversight and adherence to regulations. Failure to update this information could raise red flags during audits.

Who Needs to Know and When?

As soon as a trustee change occurs – whether it's the addition, removal, or replacement of a trustee – you should immediately notify your TPA. This includes providing them with the following information:

• Name of the Old Trustee(s)

• Name of the New Trustee(s)

• Effective Date of the Change

Best Practices for Notifying Your TPA:

• Establish a Clear Internal Process: Designate a point person within your organization who is responsible for notifying the TPA of any trustee changes.

• Communicate Immediately: Don't wait until the next scheduled meeting or reporting cycle. Prompt notification is key.

• Keep Records: Maintain copies of all communication and documentation related to the trustee change.

In Conclusion:

A seemingly small administrative task like informing your TPA about a 401(k) plan trustee change can have a significant impact on the smooth operation and compliance of your retirement plan. By prioritizing prompt communication, you can avoid unnecessary delays, errors, and potential headaches for both your company and your employees. Don't delay – make it a priority to keep your TPA and asset custodian informed and ensure your 401(k) plan continues to run seamlessly.