The quality of 401(k) plans offered needs to improve or plan participants will leave the plan. These plans need to convert to a more pension fund like approach.
Here are some of the other key design features and the percent of plans surveyed with that feature, according to the IRS survey:No age requirement to sign up (20%)
No service requirement (minimum time on the job) needed to make contributions (13%)
Employees can change deferral elections at any time (41%)
Catch-up contributions allowed for employees at age 50 (96%)
Employer matching contributions program in place (68%)
Permit after-tax contributions (4%)
Hardship distributions permitted (76%)
Employee loans permitted (65%)
For a look at the “crucial” role that 401(k) plans will play in the future of Americans’ retirement readiness, check out this speech The Investment Company Institute President/CEO Paul Stevens gave earlier this month at Town Hall Los Angeles.
The 401(k) plan has become the sole source of retirement of most Americans. If plan sponsors do not take their 401(k) plan seriously someone else will.
Please comment or call to discuss how this affects you and your company sponsored retirement plan.