Auto Enrollment and Auto-Escalation

When we think about the important goals we've reached in our lives, like graduating from college or achieving a career milestone, the journey likely took time, perseverance, and a whole lot of hard work. But the payoffs in the end are the rewards we've earned and the sense of pride we feel in the accomplishment.

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Understanding Why a QDIA Matters

Auto-enrollment has been proven to be effective in raising participation rates in 401(k) plans. As a result, it's been pretty widely adopted across the country, especially in mid- to larger plans. Automatic enrollment creates a situation where many employees fail to make an investment election on their own. This creates a need for a default investment in the lineup. A cash fund has no risk, but also has no growth potential. Other investments may have income or growth potential, but expose you, as plan sponsor, to fiduciary risk by making the decision to direct such contributions. As a result, industry regulators established what has become known as a Qualified Default Investment Alternative or QDIA.

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To Roth or Not to Roth

A compelling feature of a 401(k) plan has always been the opportunity to contribute money from your current income on a pre-tax basis today - let it work for you over the years - and then pay taxes on the accumulated balance as you withdraw it in future. That's a real attraction to many company owners and their employees. But what if you flipped this - and contributed money to your retirement savings account with post-tax dollars that you invested over time and then had the opportunity to withdraw the accumulated balance tax free - including the earnings. That's what happens in a Roth account.

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Financial Wellness – It’s Essential to Saving for Retirement

Introducing a workplace retirement plan can be a compelling way for emplyees to take control of their retirement savings, but for so many people that don't have control of their personal financial situation, the retirement plan at work doesn't have a chance to be successful without a helping hand and tools to achieve financial wellness.

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Defined Benefit Plans are Alive and Well

For the most part, the news about Defined Benefit plans lately has not been particularly good. Whether a big company could no longer fund its plan or how it was bankrupting their business, headlines have discouraged many businesses from seriously considering a DB plan.

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Cash Balance Plans Allow Six Figure Annual Contributions

Most people can contribute to their 401(k) without worrying about exceeding the annual contribution limit. If you're under 50 years old, that's $19,000 a year. If you're 50 or older, it's $25,000.

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When to Set Sail with Safe Harbor

You already know that a 401(k) is a very popular retirement plan and, like other plan designs, it allows your employees to take advantage of tax deferrals on contributions and earnings while their money accumulates for retirement.

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Did You Know You Are a Fiduciary?

When it comes to the topic of fiduciary responsibilities for qualified retirement plans, there are three things we know really well:

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3(16) Fiduciary Service and Why You Should Care

People who exercise control and authority over the management of a retirement plan's assets are fiduciaries. So are professionals who provide investment advice with respect to those assets. As a company owner or executive, in most cases you also play an investment fiduciary role unless you partially or fully outsource that function to an investment professional.

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The Loan They Never Take May Make All the Difference

IRS rules provide for participant loans and hardship withdrawals from 401(k) and other plans. They're not required, but rather left to the discretion of you, the plan sponsor. Today, there's a good bit of debate about how participant loans affect long-term retirement outcomes. On one hand, it's not hard to appreciate that employees may be more motivated to enroll in your company plan if it includes a loan feature since it provides comfort that they'll be able to access their savings in the event of an unforeseen need. On the other hand, we know if your employees take loans, they'll likely not defer more during the period of time they're making loan payments. In doing so, they risk falling behind their long-term savings goal. And in some cases people default on their loans and fall even further behind. One option to consider is to limit loans to covering hardship events like certain medical expenses or buying a principal residence or paying for school tuition and fees. Doing this may discourage more casual use of a loan while still making it available for situations of real need.

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Understanding How Forfeitures Work in Your Retirement Plan

When we talk about 401(k) retirement plans, we sometimes focus on the contributions made by employees that are always immediately vested. In other words, it's their money and they can always withdraw it without forfeiting any - subject to certain IRS rules about early withdrawals.

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Maximizing a Business Owner’s Retirement Benefit

It's a common story - business owners put everything into their businesses for years before being in a financial position to put real money away for retirement. Once you're ready to really get going, we can suggest a number of retirement plan designs and individual plan features that can help you reach your goals. Depending on your situation, here's a quick snapshot of some of the most popular:

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Understanding Financial Statement Audits

While we hope you have never had to experience it, you're no doubt familiar with the idea of an audit of your personal or corporate tax return. But you may not be familiar with an audit of your qualified retirement plan. There are two broad categories of retirement plan audits. Today, we'll focus quickly on two groups of plans that the Department of Labor requires to have financial statement audits by an independent qualified public accountant, or CPA.

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Advantages of an Unbundled Retirement Plan Solution

There are some things we're happy to buy right off the rack. After all, mass production usually means consistency and cost-savings. On the other hand, when we do buy off the shelf, we compromise on individual choice and sometimes flexibility in getting the exact qualities and features we want. In retirement plan terms, that can be a good way to think about the difference between a bundled solution from a single provider and an unbundled solution delivered by multiple specialists.

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Aligning Plan Design with Your Goals

Most of us live in homes that were not custom-designed for us. We adapt to them rather than expect them to be optimized to how we like to live. Most retirement plans are sold the same way. Companies buy something off the shelf that was intended for a generic audience, but not necessarily ideally suited for them. The irony is that while these plans are sold as cost-efficient, they often wind up costing their buyers a great deal in the long run because of lost tax savings or retirement savings since they're not optimized to their particular situation.

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Encourage Greater Participation with a QACA Safe Harbor

You already know that a 401(k) is a very popular retirement plan and, like other plan designs, it allows your employees to take advantage of tax deferrals on contributions and earnings while their money accumulates for retirement. To enjoy this special status, the IRS put in place rules to assure your plan benefits rank and file employees and not just company owners and highly compensated employees. These are called nondiscrimination rules and there are tests that must be performed each year to determine whether your plan measures up.

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It’s Time to Restate Your Defined Benefit Plan Document

Every retirement plan is required to have a formal written document that spells out how it operates.

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Your World Evolves and Your Retirement Plan Should Too

The written version of your retirement plan, your plan document, defines how the plan operates. Naturally, when you started your plan, it reflected what we knew about you and your company at that moment in time.

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Four Things to Know about ERISA Fidelity Bonds and Fiduciary Liabiity Insurance

The Employee Retirement Income Security Act known as “ERISA” regulates 401(k) and most other types of employee benefit plans. Under ERISA, anyone who handles retirement plan funds must be covered by a fidelity bond.

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Pension Corporation of America provides these informational videos as educational tools; however, they do not act as a substitute for speaking to a licensed financial advisor. We’d be more than happy to speak with you regarding any financial questions you may have.

© 2020 Pension Corporation of America®. Pension Corporation of America provides this information for educational purposes and does not assume liability for potential outcomes that result from the described material. Investment decisions are encouraged to be based on personal and financial analysis through independent and professional consultation. Pension Corporation of America ensures that best efforts are made to provide the most current and accurate information, although unintended errors and changes may occur. Under no circumstance will Pension Corporation of America be held responsible for damages that result from the usage of access to/from provided educational materials.

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