401k Plans benefit from the many features outlined in the TPSU Ideal Plan. Unfortunately, and somewhat surprisingly, many unenlightened Plan Sponsors are still failing to take advantage of auto enrollment, managed accounts, and auto increase features. For well-over 5 years The Plan Sponsor University (TPSU) has shared this information with plan sponsors. There are various reasons 401k plans benefit from the foundational features of the Ideal 401k Plan.
Educated Plan Sponsors no longer view the 401k plan benefit as a stagnant “off the shelf” company benefit program. The days of the employer contributing 2% or 3% of compensation to the plan may be behind us. The 3% annual funding levels are no longer sufficient to deliver a workforce to a secure retirement. That is the opinion of Plan Sponsors and Plan Fiduciaries, from New York to Tampa and Los Angeles who have been educated by The Plan Sponsor University. We can now plainly see as the numbers speak for themselves – the 3% annual company contribution to the 401k plan cannot sustain an individual from retirement through to life expectancy.” Increasingly, plan fiduciaries now understand that since viewing the numbers.
After conducting the first 100 TPSU Programs nationwide and getting feedback from over 1,000 plan fiduciaries, TPSU uncovered the following as components of the TPSU Ideal 401k Plan:
- Auto Enrollment of all eligible employees is prudent
- Automatic Deferral into the plan needs to be at a meaningful rate – 6% or higher
- Auto Increase of the participant’s deferral should be at 1, 2 or 3% per year – capped at either 12 or 15%
- A Managed Account Option needs to be offered in the 401k plan benefit structure. This seems to be a prudent offering in the Investment-lineup (thus making it simple for participants to prudently invest).
Why Consider the TPSU Ideal 401(k) Plan Structure?
The majority of eligible employees will be better served than they are today. The Ideal Plan does not increase fiduciary liability. A good retirement plan advisor can show a plan sponsor how to implement these features without an increase in plan contribution costs. (A retirement plan advisor who holds the C(k)P Designation can demonstrate how to Stretch the Company Match without increasing the amount of the company contribution.) If present, incremental plan cost increases can be offset by the savings associated with having a workforce that is retirement ready at normal retirement age.
TPSU IDEAL 401(k) Plan uses features of Save More Tomorrow
The Plan Sponsor University provides education and research to the Retirement Industry. Please ask your Retirement Plan Advisor for assistance in implementing the TPSU Ideal 401k Plan features as one of your 401k Plan Benefits. Always remember, retirement plan advisors who hold the C(k)P Designation bring 401k plans benefit experience and an academic knowledge-base to your retirement committee.
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