What does it look like to deliver an exceptional 401k plan experience? To achieve success, you want to follow proven as best practices that help participants achieve retirement-readiness, and ones that are also fiduciarily sound.

It’s important to recognize that as an Association Executive you are most likely named as a Plan Trustee. According to the Employee Retirement Income Security Act (ERISA), Plan trustees are considered a fiduciary and must accept responsibility to preserve the assets entrusted to them on the behalf of the plan participants. Fiduciaries are expected to make fund-management decisions with the same professionalism as a prudent expert. As you examine the structure of your current Retirement and work to make improvements it’s advisable to work with a Retirement Plan Advisor or consultant that can help you make the necessary changes that will protect your from fiduciary risks and provide the most value. Below are several recommended strategies that can support a sound retirement plan experience for your Association:

Retirement Plan best practices

Auto-enrollment

With opt-out rates of less than 10 percent, auto-enrollment has become the most effective way to combat employee inertia at enrollment and support healthy plan contributions overtime.

Immediate contribution eligibility

Very few progressive employers make their participants wait to begin making 401k contributions. Immediate eligibility for both regular pre-tax and Roth 401k contributions is now a standard practice across most industries.

Designate a QDIA

Employers designating a Qualified Default Investment Alternative (QDIA) receive protection from participant lawsuits relative to losses participants may suffer in the QDIA investment.

Auto-escalation

Studies show that participants need to add at least 15 percent to their 401k accounts each year to accumulate a retirement-ready balance. Annual auto-escalation of 1 percent per year or greater can help them significantly. If you are considering auto-enrollment, then you should also consider auto-escalation as they go hand-in-hand.

Offer a Roth 401k deferral option

Participants will benefit from a contribution strategy that includes the use of Roth 401k accounts. After five years, balances in these accounts may be distributed tax-free (for qualified distributions). Participants who contribute to Roth accounts for their entire careers may build an enormous tax-free balance. Also, executive groups appreciate having the option to use these accounts to execute tax-planning strategies.

Safe harbor plan design

This form of Retirement plan design provides exemptions from non-discrimination testing requirements if a mandatory level of employer contributions is made. It is highly recommended to avoid testing failures that tend to hurt highly compensated employees the most.

Perhaps the most critical factor to success is education. The key to a successful retirement program is understanding. Employees cannot fully appreciate benefits they do not understand and may not use or interact with. Employees can be frozen with uncertainty when it comes to enrolling and managing their retirement accounts. Work with your provider to deliver guidance and advice using innovation that offers employees clarity to help them take the next step. Be sure to deliver education across a variety of spectrums since employees have different learning styles and preferences. With a well-designed plan and a robust employee education strategy, you can be confident you are delivering an excellent retirement plan experience.

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