401k Plan Design Checklist


401k plan costs have many elements. A brief checklist of 401(k) design considerations is provided.

I. Design aspects of funds entering the 401k (contributions)

    1. Employee deferrals

      A. Is the maximum 401k deferral percentage consistent with the overall employer deduction limit of 15%?

      B. Is the maximum 401k deferral percentage consistent with the individual account additions limitation of 25%?

    2. Matching contributions

      A. Have they been designed to encourage maximum participation of employees?

      B. Can the employer afford them?

    3. Profit sharing contributions. Will they be used? How will they be determined?

    4. Eligibility requirements

      A. How have the requirements to enter the plan been determined?

      B. How have the requirements to receive employer matching or profit sharing contributions been determined?

II. Design aspects of funds within the 401k (account balances)

    1. Investment alternatives. How has the decision whether investments should be pooled or participant-directed been determined?

    2. Investment selection. How will individual investments be chosen?

    3. Vesting percentages. How has the vesting schedule been determined?

III. Design aspects of funds distributed from the 401k (distributions)

    1. Payments on termination of employment

      A. Settlement options. How have they been selected?

      B. Timing of distributions. When are distributions available to terminated participants? How has this been chosen?

    2. Loans

      A. Have the needs of employees and administrative costs to the employer been considered when deciding whether loans should be permitted?

      B. Has a loan policy been established?

    2. Hardship distributions

      A. Have the needs of employees and administrative costs to the employer been considered when deciding whether hardship distributions should be permitted?

      B. Has a policy for these distributions been established?


401k Plan Further Assistance

Please describe your 401k concerns on our short form. We will reply promptly to employers and their representatives. Or call us at 718-793-9885. Our web site homepage contains additional useful 401k information.

 

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