Is It Time for a 401(k) Review?

Is It Time for a 401(k) Review?

As the year ends and another begins, you naturally think about the state of your business – what is working well, and what could improve in the future?

When was the last time you thought about the state of your company’s 401(k) plan?

Make no mistake, 401(k) plans need yearly reviews. A good 401(k) plan review evaluates four factors to gauge a plan’s effectiveness.

Investments. How are the investments performing? Should the line-up be altered? Might some employees ask you to find investments with lower fees? Might others want a wider range of investment choices?

Compliance. Enrollment, employer matches, distributions, loans – are they all proceeding according to the rules for 401(k) plans? If the plan is non-compliant in any of these areas, your company could be at risk for financial penalties and lawsuits, and the plan could lose its tax-favored status.

It’s good to remind employees that distributions from 401(k) plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Once you reach age 70½, you may be asked to take required minimum distributions.

Participation. How many of your workers use the plan? If your answer is “not nearly enough,” there are ways to encourage greater participation. You need broad plan participation by lower-earning employees to meet non-discrimination tests.

Deferrals. What is the average deferral rate among plan participants? Is it higher for the highest-earning employees? While this tendency is common, you want all plan participants to contribute to their accounts at a decent level.

The best way you can make sure your plan is compliant and up-to-date is to get a regular 401(k) review. And as we begin 2020, let’s look at ways that our businesses can be better, stronger, and more receptive. One way to put a check mark next to all of these items is to look at your company 401k and how it benefits both your company and your employees. For a no-nonsense assessment, please call the Moneywise Wealth Management office at 661-847-1000 or email



2019 Marketing Pro Content + Citations:

1 – [2/12/19]

2 – [3/14/19]