How to Update Your 401(k) Plan in 2019
As a small business owner, offering a 401(k) plan for your employees is one of the best benefits you can offer. While saving for retirement is something your employees know they should be doing, they may not actually be participating in your 401(k) plan. If low 401(k) participation is a problem for your small business, download the recording for our webinar, 6 Ways to Improve and Update Your Retirement Plan in 2019, to learn how to get your employees invested.
Why 401k Participation Matters
Did you know that low participation rates in 401(k) programs can negatively impact your business? If too few employees are participating in your 401(k) plan, this makes the IRS concerned, and they could potentially launch a non-discrimination test. Mostly, the government wants to make sure that your plain is fair and ethical and not something that only benefits company owners and the highest compensated employees.
Reviewing Your 401(k) Plan
With many small business tasks, choosing a 401(k) plan isn’t a set it and forget it task. Once a year you should be evaluating your 401(k) plan and getting insight from your investment advisor to discuss the plan’s health. The four areas you should focus on assessing each year are participation, savings, diversification, and HCE vs. NHCE participation. Tying into our previous point, participation is one of the best and most common ways to evaluate how healthy a 401(k) plan is. Some other review topics to keep in mind are:
- Current plan costs
- Ensure you are maximizing your tax-deductible savings
- Increases in the basic salary reduction limit for 401(k) plans
- Changes to the maximum amount of taxable compensation for qualified retirement plans
How to Talk to Employees
There are a variety of reasons employees don’t participate in 401(k) programs with a few examples being, retirement savings isn’t a priority to them, and they believe they can’t afford to save for retirement, or they don’t know about your plan benefits. While you can’t force your employees to sign up for your 401(k) program, you can provide information as to how it benefits them. You can educate them on retirement plans and their importance by presenting industry research. Numbers tend to be motivating to people, and when they understand how much they could be saving and how easy it is, that could help increase participation. Additionally, let them know about the plan you’re offering, including information like employee matching.
Looking For More?
When you download the recording of our webinar, 6 Ways to Improve and Update Your Retirement Savings in 2019, you will learn some tips and tricks to get your employees invested in your 401(k) plan.
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