Have You Ever Compared Your 401(k) Plan Structure to Others?
A recent study conducted by Callan (one of the largest independently owned investment consulting firms in the United States) indicated some interesting trends in 401(k) – defined contribution plans across the country for the 2020 Plan year.
- 82% of survey respondents across various industry types offer 401(k) plans. This was the most popular plan type across all industries.
- Overall plan committee meetings increased by 20% in 2020. Most meetings were held virtually due to the pandemic but the number of meetings increased. This was due to an increased focus on governance and process, investment structure reviews and basic due diligence.
- Many plans indicated they want to conduct a formal review of plan fees for 2021, complete formal fiduciary training and
perform a review of their investment policy statement, and related procedures or simply create an investment policy statement.
- Investment structure changes were slowed in 2020 – only 16% of respondents indicated they made investment option changes compared to 25% in 2019.
- 79% of plans offer Roth deferrals and 70% automatic enrollment.
- 10% of plans reduced or suspended their Company match due to the pandemic. 80% of this group indicated they plan to reinstate the match for 2021.
- Priorities also changed due to the pandemic. Top areas of focus in 2020:
- Supporting immediate employee financial needs
- Increased employee communications about the plan
- Modifying how communication takes place (more virtual meetings due to the pandemic)
- The most common investment options continue to be mutual funds and collective trusts.
Not all Plan options fit all Plan Sponsors but we recommend each Plan Sponsor benchmark their plan options against others periodically. This helps make the Plan attractive to potential employees and keeps the benefit Plan offering competitive. If you see an option on this list that you are interested in including in your Plan structure, we recommend you discuss it with your service provider (recordkeeper, TPA, Plan Attorney, etc.). They should be able to guide you in an evaluation of the cost and benefits of the option and whether it makes sense for your Plan.
When it’s time for an audit for your plan it’s vital that you hire a trusted auditor. At Summit CPA we specialize in retirement plan audits. We have the ability to offer assistance entirely off-site with little or no distraction to your daily office routine. We also offer flat-fee pricing so there are no surprises on your bill when the job is complete. For assistance contact our office at (866) 497-9761 to schedule an appointment.