Retirement Plan Rx

View This Newsletter: Retirement Plan Rx

Overview: The latest news regarding retirement plans has centered around service provider fees. While fees are a highly important aspect of managing an employer-sponsored retirement plan, they are not the only metric of your overall retirement plan’s health.

Bonus Material:

  • Rise of the Machines: Robo-advisors are a class of auto-adviser that provide financial advice or portfolio management online with minimal human intervention.
  • Participant Loans – Benefit or Detriment: Account leakage due to participant loans is a significant issue in retirement planning with some experts even calling it a crisis.


  • Types of Retirement Plans
    • Historical focus on defined benefit plans or “pensions”
    • Migration to defined contribution plans such as 401(k) plans
    • The benefits of any 401(k) plan can vary drastically depending on the annual funding decisions of the plan sponsor
    • Studies show less than favorable employee participation rates
  • Getting Employees to Join the Plan
    • Education:
      • The best way to encourage participation is to keep the plan straight forward, accessible, and provide access to great educational tools.
      • Most financial advisors are more than willing to help in this endeavor
    • Automatic Enrollment:
      • Automatic enrollment allows an employer to enroll an employee into the company’s plan at a determined contribution percentage unless the employee makes an election not to contribute, or an election to contribute a different amount
    • Roth 401(k) Option:
      • Under the Roth 401(k), employees may contribute funds on a post-tax elective deferral basis, in addition to, or in place of, pre-tax elective deferrals under their traditional 401(k) plans
    • Mobile Options:
      • Providing low-cost apps allows workers to take care of benefits on the devices that they are already familiar with and constantly using
  • Increase Deferral Rates
    • Increasing Automatically Enrolled Contributions:
      • The typical 3% default contribution is usually not touched after the initial enrollment, so increasing the rate of the default contribution can further a participant’s chances of a healthy retirement
    • Stretching a Match:
      • To persuade participants to increase contributions, some plan sponsors have adopted a stretched match as a form of motivation
    • Automatic Escalation:
      • With auto-escalation, the contribution level is automatically increased at regular intervals, typically 1% a year, until it reaches a preset maximum.
  • Utilizing Your Resources
    • Interaction with knowledgeable plan advisors is a facet of retirement education that is underutilized
    • Future Possibilities: Auto portability just may be a pension innovation worth keeping an eye on
Pinnacle Plan Design is a third-party administrator (TPA) for employer-sponsored qualified retirement plans. We specialize in retirement plan design, administration and actuarial consulting for 401(k)/profit-sharing plans, defined benefit plans, cash balance plans, and 403(b) plans. Pinnacle Plan Design proudly serves businesses nationwide.
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