How Did 2013 Discrimination Testing Go? Employee Benefit Adviser blogger Jerry Kalish writes that for many employers, it didn’t go very well. Which is to say, their 401(k) plan failed to meet the 401(k) discrimination test.
He recommends bringing three key planning issues to the forefront in 2014:
Safe harbor options. Understand IRS safe harbor plans, which allow an employer to automatically pass the 401(k) discrimination test.
Targeted employee communication. Focus your employee messaging to encourage increased participation among non-HCEs.
Automatic enrollment. With the growing realization that retirement readiness is a significant problem, more employers are adopting it.
Automatic 401(k) Plan Features Still “Hot” in 2014 Autopilot plans are a good solution that continues to catch on, writes Phyllis Furman of the New York Daily News. For example, nearly 25 percent of Fidelity's plans offer the service, up from 17 percent four years ago, with the expectation that this number will continue to grow. Auto-enrollment and auto-escalation have been on the upswing since the passage of the Pension Protection Act in 2005.
Other hot trends? Roth 401(k)s and "self-directed brokerage windows" that allow you to invest in funds outside of your company's fund lineup.
One potential leak is automatic enrollment, which can be a double-edged sword. Auto-enrollment has helped raise participation rates to 78 percent, up from 67 percent in 2005, when the Pension Protection Act was passed.
Retirement Plan Participation on the Rise Research of census data by the Employee Benefits Research Institute (EBRI) finds 61 percent of all workers over age 16 had an employer that sponsored a pension or retirement plan for any of its employees in 2012. This is up from 59 percent in 2009.
Workers participating in a plan increased to 46 percent in 2012, up slightly from 2009 (45 percent) but below 2003 (48 percent).
Automatic Features and the Power of Bundling New research and analysis from Retirement Made Simpler and Lincoln Financial Group demonstrates just how much impact the bundling of automatic features can be when it comes to increasing employee participation and deferral rates.