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Is Your Plan Keeping up?



All employers, regardless of size are looking to maximize their 401(k) benefit while keeping plan costs in check.  With that in mind, we have compiled a list of the top five plan trends we are seeing currently.  Please let us know if you have any questions on the below or would like additional information on how you might incorporate any of these features into your company plan.

Auto Enrollment   Most 401(k) plans require employees to actively choose to put money into the plan. Many plans are starting to adopt automatic enrollments as a way to increase participation.  Automatic enrollments withhold a certain percentage of employee pay automatically to put into the retirement plan, and then allow the employees to opt out if desired.  As an employer, this is beneficial because it not only increases plan participation, but also offers significant tax advantages to both employer and employer.

Utilize on-line tools/education    By utilizing the tools available from your plan provider, participants can establish saving goals, measure progress and research the funds available to them.  Many providers are also implementing on-line services such as loan requests, distributions, and deferral changes to name a few.

Stretch the Employer Match  Studies show that how an employer’s matches employee contributions to retirement plans can have a huge impact on deferral rates.   For example, let’s say, you are matching 100% of the first 3% that your employees contribute to the plan.  Instead, you could S T R E T C H your match to a 50% match of 6% of pay.  In doing this you essentially have increased your employees’ annual contributions from 6% to 9% of their pay.   Imagine what 3% of their pay over 20 years could grow to for retirement.  While you are incentivizing saving you, are not significantly increasing the cost to the company.

Offer a Roth Component  With a traditional 401(k) contribution all money is going into the plan on a pre-tax basis.  By adding a ROTH contribution option you give your participants  the option of making post-tax contributions which means Instead of getting a tax break when you make the contributions, Roth accounts allow you to pay the income tax at your current rate.  This can be especially beneficial for people who are young or in a low tax bracket. Withdrawals in retirement will then be tax-free


LD0537 10-06/15