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Does your 401(k) Absolutely Stink?

Does your 401(k) Absolutely Stink?

December 27, 2022

Maximizing Your 401(k) Program: Enhancing Employee Benefits and Financial Security

As a forward-thinking plan sponsor, you understand the importance of regularly evaluating and improving your 401(k) program to ensure it meets the evolving needs of your employees. In this blog post, we will delve into various aspects of optimizing your 401(k) program, addressing key issues that may be on your mind. From expanding investment choices to enhancing user-friendliness and reducing liability, we will explore strategies that can help you enhance the overall effectiveness of your plan.  As a plan sponsor, you may be thinking about the following issues:1

1. Expanding Investment Choices: Empowering Your Employees

One crucial consideration for plan sponsors is the range of investment choices offered within the 401(k) program. By providing your employees with a diverse array of investment options, you enable them to tailor their portfolios to their unique risk tolerance and financial goals. This not only enhances employee engagement but also promotes a sense of ownership and empowerment over their retirement savings.

2. Enhancing User-Friendliness: Simplifying the Retirement Saving Experience

A user-friendly 401(k) program can significantly impact employee participation and contribution rates. By streamlining the enrollment process, simplifying investment selection, and providing intuitive online tools, you can make it easier for employees to navigate and manage their retirement savings. Additionally, offering educational resources, such as webinars or personalized financial counseling, can help employees make informed decisions and feel confident about their retirement planning.

3. Automatic Enrollment: Boosting Participation and Savings Rates

Automatic enrollment has gained popularity as an effective strategy to increase employee participation in 401(k) plans. By automatically enrolling eligible employees and setting a default contribution rate, you can overcome inertia and encourage individuals to save for retirement. However, it’s important to ensure that employees have the flexibility to opt-out or adjust their contribution levels according to their financial circumstances.

4. Exploring Cost-Effective Alternatives: Balancing Quality and Affordability

While providing a high-quality retirement plan is essential, it’s also crucial to evaluate the costs associated with your 401(k) program. Conducting periodic benchmarking assessments can help you determine if there are more cost-effective options available in the market that offer comparable benefits. However, it’s essential to strike a balance between cost and quality to ensure that your employees have access to robust investment options and comprehensive retirement planning services.

5. Meeting 404(c) Employee Education Requirements: Empowering Participants

As a plan sponsor, it’s crucial to meet the 404(c) employee education requirements. This involves providing clear and concise information about investment options, risks, and fees. By empowering participants with the knowledge and tools they need to make informed investment decisions, you not only fulfill your fiduciary responsibility but also foster a culture of financial literacy and engagement among your employees.

6. Reducing Liability: Mitigating Risks and Protecting Your Plan

Reducing liability is a top priority for plan sponsors. Implementing robust governance practices, such as conducting regular plan audits, documenting committee meetings, and ensuring compliance with regulatory requirements, can help mitigate risks. Additionally, working with experienced service providers and fiduciary advisors can provide valuable guidance and support in navigating the complex landscape of retirement plan regulations.

7. Evaluating Fund Quality, Costs, and Fees: Striving for Optimal Performance

To ensure your 401(k) plan remains competitive, it’s essential to periodically evaluate the quality of investment funds, as well as associated costs and fees. By comparing your plan’s performance against industry benchmarks, you can identify areas for improvement and make informed decisions about fund selection and fee structures. Regularly monitoring and evaluating investment performance can help you maintain a robust and attractive retirement plan for your employees.

Optimizing your 401(k) program requires a comprehensive approach that addresses various aspects of plan design, participant education, and fiduciary responsibility. By proactively exploring strategies to expand investment choices, enhance user-friendliness, and reduce liability, you can create a retirement plan that not only meets regulatory requirements but also empowers your employees to achieve their long-term financial goals. Remember, continually reassessing and refining your 401(k) program is key to maximizing its effectiveness and providing your employees with the tools they need for a secure retirement.


About the Author:

Damon Paull is a Marine Corps veteran who has traveled to over 20 countries. As a financial advisor in Houston, Texas, he is passionate about helping business owners and individuals pursue their financial goals. You can connect with Damon and his team at: 703.362.5747 or DPaull@totuswm.com.


1. Under the SECURE Act, once you reach age 72, you must begin taking required minimum distributions from your 401(k) or other defined-contribution plans in most circumstances. Withdrawals from your 401(k) or other defined-contribution plans taxes as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.