MAKING A GOOD 401(k) PLAN EVEN BETTER

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MAKING A GOOD 401(k) PLAN EVEN BETTER
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TOPICS COVERED

• Increasing Participation
• Understanding Your Plan
• Roth 401(k)
• Safe Harbor
• Investment Policy Statement
• Managing Fiduciary Responsibility

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INCREASING PARTICIPATION

• Annual Employee Education Meetings (or more
  frequent)
• Mandatory attendance for new hires
• Periodic distribution of literature to promote
  plan and relevant retirement planning or
  investment topics
• Decrease eligibility waiting period to join plan
• Can keep the waiting period for employer
  contributions longer - known as Dual
  Eligibility
• Offer more frequent entry dates

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INCREASING PARTICIPATION

• Incorporate a match formula that requires /
  entices employees to defer to receive an employer
  contribution
• Design a match formula that requires greater
  deferrals to maximize match
• Instead of matching 100 of 3 a maximum match
  of 3 ...
• Offer a match of 50 of 6 a maximum match of 3

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INCREASING PARTICIPATION

• Auto Enrollment
• If no affirmative deferral election is made by
  employee (including 0), they are automatically
  enrolled in the plan for a set deferral
  (typically 3 6)
• Have option to also auto-increase beginning
  deferral each year by 1 up to a maximum of 10
• Employee has 90 days to reverse initial deferrals
  out of plan without penalty
• Stopping or modifying future deferrals determined
  by provisions of the plan

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UNDERSTANDING YOUR PLAN

• Need to understand and evaluate provisions
• Eligibility Waiting Period
• Is there also a minimum of hours required or
  simply length of service?
• Dual Eligibility
• Entry Date
• Exclusions by classification
• Plans Definition of Compensation
• Deferrals
• Changes to deferrals

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UNDERSTANDING YOUR PLAN

• Need to understand and evaluate provisions
  (continued)
• Match
• Annual Employer Contributions
• Vesting
• Withdrawals
• Using and Allocating Forfeitures
• Updating participant records

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ROTH 401(k)

• A new, optional, account source within an
  existing 401(k) retirement plan
• Combines some features of Traditional 401(k) and
  Roth IRA
• Gives the OPTION to set aside money for
  retirement on an after-tax basis
• Earnings grow on a tax-deferred basis and
  qualified withdrawals made tax free (at age 59 ½
  and held the account for 5 years)
• NO INCOME LIMITS all participants are eligible
• Can also allow pre-tax sources to be converted
  to Roth 401(k) source

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SAFE HARBOR PLAN DESIGN

• Allows employers to avoid Compliance Testing on
  401(k) deferrals
• Highly Compensated Employees can defer up to plan
  or IRS maximum each year
• Requires an employer contribution to plan (limits
  and restrictions apply)
• Certain Match or Profit Sharing formulas qualify
• Generally requires accelerated vesting (immediate
  or 2 year)
• Can be made in addition to other non-safe
  harbor plan contributions

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INVESTMENT POLICY STATEMENT

• Intended to assist Plan Fiduciaries to make
  investment related decisions in a prudent manner
• Outlines underlying philosophies and process for
  selection, monitoring and evaluation of
  investments offered to participants
• Should be reviewed and applied at least annually
• Third party administrator or plan provider does
  not necessarily provide or maintain this even if
  they have provided investment menu
• If investments challenged by participants, a
  sound Investment Policy Statement and process can
  provide protection

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THE ROLE OF A PLAN FIDUCIARY

• Many activities associated with plan operations
  make the person performing them a fiduciary
• Fiduciary status based on functions, not job
  title
• Act on behalf of participants, subject to
  standards of conduct, and liability
• Act solely in interest of participants
• Carry out duties prudently
• Follow plan documents
• Diversify investments
• Pay reasonable plan expenses

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MANAGING FIDUCIARY RESPONSIBILITY

• Maintain an updated, IRS approved document
• Be aware of responsibilities as Fiduciary
• Fiduciaries and Plan Committee meet at least
  annually
• Maintain due diligence file
• Investment employees deferrals in a timely
  manner
• Review investments at least annually including
  performance and fees (document this review)
• Offer employee education at least annually

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SUMMARY

• A few simple improvements and changes can allow
  for significant benefits
• Periodically monitor and review what is currently
  offered
• Document reviews
• Be aware of and consider new alternatives and
  improvements