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Is it Time for a 401(k) Tune Up?

Tuesday, September 18, 2018
We sometimes encourage retirment plan participants to take the "set it and forget about it" approach to their 401(k) account. It is designed to be used for retirement, after all. However, this approach may not be as beneficial to the plan sponsor. As with any prudent business owner, starying up to date on the newest trends and developments helps in operating a successful business. Attracting and retaining employees by offering a retirement plan is one way that the business owner can remain competitive.

What are some things that a business owner should consider when reviewing the company's retirement Plan?
 
Accept Rollovers In to Your Plan
This feature is a good  bullet point to add to the benefits of company employment for new employees. It is a provision that may already be allowed in your plan document and just needs to be mentioned as a way to easily consolidate retirement savings accounts. If not, the employee may be temped to withdraw the money from their prior Employer's plan and pay taxes, possibly even penalties, on money that could have been rolled into their new plan tax free.

Provide the Latest User Friendly Tools
Most of today's workforce is comfortable with the internet and in fact, prefers to have their information provided electronically. Personalization of the participant website is increasing as more products are becoming available to help the plan participant make smarter choices. The use of a mobile app has also gained popularity as more millennials enter the workforce. Participants was to be able to go to a website, make investment changes, request a loan, distribution or change their contribution amount without having to complete a paper form, send it in, and wait for days to have it returned. Although in some of the mentioned examples paper may still need to be involved, it at least gets the process started right away.

Add an Automatic Enrollment Feature
This feature is gaining popularity as more business owners are taking action to help put their personnel on a path to retirement readiness. Unless a Participant makes an affirmative election, the Employer with Hold a relatively low deferral percentage. The system can be set to automatically increase the deferral rate each year. Studies have shown that long term employee participation in plans with automatic enrollment is considerably higher than in those plans without such feature. This is generally a welcome provision to the employees as it is one less thing they need to monitor.

Allow Immediate Participation for Employee Contributions
According to 401khelpcenter.com, 24% of plans in 1998 allowed employees to begin contributing immediately to their 401(k( plan. Now, over 62% do so. Employees are much more likely to begin as well as continue to participate when they already have the deferrals coming out of their paycheck from the beginning of employment rather than decreasing their take home pay at a later date to start their deferrals.

Get Help
Retain the council of a Retirement Plan Services professional to review your plan structure and recommend updates or changes based on any recent regulations that may affect current provisions in your plan. Be clear about what you would like to benefit from your retirement plan. Every business owner has their own set of ideas and no one retirement plan structure fits all employers.

It is always a good idea to look at the provisions of your plan each year. Work with your service provider to design a plan to meet your goals for you as the business owner as well as your employees. To learn more about your 401(k) Tune Up, call Amy Griffith at (318) 429-2042 or email agriffith@hmvcpa.com. For more information on the services available to you by Heard, McElroy & Vestal, LLC, call our Shreveport office at (318) 429-1525, our Monroe office at (318) 388-3108 or visit www.hmvcpa.com.
 



Author: Amy Griffith, QPA, QKA, APA, Retirement Plan Services Manager