The 16 months prior to January 2010 have been an unprecedented time for 401(k) participants. Outstanding financial advisors have demonstrated the value they provide to their 401(k) plan sponsor clients by guiding them through several challenging months. Financial advisors can now guide their clients through a plan review by asking key questions.
- How have the demographics of your company changed?
- Have you considered the addition of the Roth feature?
- Does your design still meet the objectives for your plan?
If the demographics have changed, the plan will be affected. A significant workforce reduction can result in a partial plan termination which will impact participants' vested balances.
If the plan has not added the Roth feature, the plan sponsor should consider it now. Diversification of tax consequences is just as important as investment diversification. A plan sponsor should make this feature available so that the participants have the opportunity to decide if pre-tax or after-tax Roth savings or some combination of the two is most appropriate for their goals.
Finally, plan design is critical. Many plan sponsors, with help from their Third Party Administrators, are completing their EGTRRA restatements; therefore this is an excellent time to make changes. Are the employer contribution requirements flexible enough to allow for fluctuations in the employer’s cash flow and business cycles? Does the plan allow for in-service withdrawals so that employees close to retirement have the flexibility to have access to investments that are most appropriate for their time horizon? Are the owners getting the level of contribution they need to justify the cost of the plan? Are fees fully disclosed?
Please contact Karyn Dzurisin or Tom Ackmann and allow us to guide you through the imperative plan review process. Or, submit your inquiry using the form on our Contact Us page.
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