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Is your company’s retirement plan built to drive participation?

401(k) Insights

February 2024

401(k) Insights serves as our monthly newsletter created specifically to assist business owners and plan administrators in navigating their retirement plan requirements.  If you have any questions, please contact us anytime. 

Employee participation in your company 401(k) plan is critical to your plan's compliance. In this edition, we will address how modern plan design features like automatic enrollment and escalation can help you. 

Here are some important points to consider.

-  Most 401(k) plans are subject to annual nondiscrimination testing. These tests are designed to ensure that the plan doesn't unfairly benefit highly compensated employees (HCEs) over non-highly compensated employees (NHCEs). The HCE threshold for 2024 is $155k and above.

When a plan fails the nondiscrimination tests, the plan sponsor typically must take corrective action, such as returning excess contributions to highly compensated employees or making additional contributions to non-highly compensated employees' accounts. These corrective actions can be costly and administratively burdensome for the plan sponsor.
 Studies have consistently shown that auto-enrollment leads to higher participation rates and increased retirement savings contributions, ultimately helping more employees prepare for retirement. Higher overall participation rates can make a significant impact on the plan’s ability to pass the annual nondiscrimination test, especially when paired with an auto-escalation strategy.
Are you confident your plan is compliant and maximizing your benefit? We can help. If you’d like a complementary review of your retirement plan, please click this link and provide some basic information. Or you can schedule an introductory call below.