Thanks for joining us for this exciting follow up! OK, not so exciting. But important and useful, especially during Q4 when many of you are reviewing your current plan and evaluating its performance. Let’s jump right in.

  1. Re-enrollment

Re-enrollment is helpful because it refreshes employees’ investments and brings to topic back up, something most have long forgotten about.

When conducting re-enrollment, use the QDIA as a safe harbor for those employees who do not select their own investments.

While you’re at it, if you have recently selected a QDIA, comb through the plan to see if it would be beneficial to sweep in assets that were invested prior to adding the QDIA.

Lastly and most importantly, make sure to notify and educated your employees on all the investment options including the QDIA and any transfers that will be going on. A little proactive outreach will go a long way here.

  1. Matching Schedule

An employee match is a hot topic in most plans. Most employers would like to offer it because they at heart want to help the employees, but at the same time they don’t want to lock themselves into an obligation in case times get hard.

If you currently aren’t offering a match, poll your employees, especially the non-participants, to gauge how effective a match would be in raising overall participation rates for the plan.

If you are already offering a match, encourage employees to take full advantage of the match, and use actual numbers to show them how much they are missing out on.

Lastly, analyze your matching formula and vesting schedule to determine whether small tweaks in either would help increase plan participation.

  1. Evaluating your investment menu

It is extremely important to have a robust investment menu, but at the same time, too many options can overwhelm your employees. What’s a plan sponsor to do?

One option is to use a layered menu approach. The first layer is for less sophisticated investors that want to “do it for me” approach. Usually this is your QDIA option and includes either a target date or risk based model. The other option is to offer third party money managers, either is a self-directed account (usually for execs and HCEs wanting to use their own advisor) or through an automatic program offered but your current plan consultant or custodian.

The second layer is for the much smaller but much more interested group – the “sophisticated investor”. Now, we use this term loosely because studies have shown that the “do it yourselfer” usually underperforms the QDIA option over time, mostly due to oversight and emotional triggers. But nonetheless, this group is going to be very proactive and encourage healthy discussion in education meetings, so you want to offer them a complete set of choices to create their own menu.

These options should be chosen using your previously created IPS (you already wrote yours after reading Pt.1 of the blog… right?) and should pass muster on generally accepted metrics for 401(k) and pension investment choices. Your advisor or consultant usually helps greatly in this regard, so feel free to lean on them for this.

If you haven’t created an IPS yet, look forward to our upcoming blog entry devoted to the topic, coming right after Pt. 3 of this Best Practices series.

Thanks again for stopping by and taking the time to catch up with our latest post. Stay tuned for the 3rd and final installment in this series.

Until next time, happy saving.


Remember these are starting points to keep your focus fresh on your plan’s needs, and all decisions should be reviewed and discussed with your internal team and plan consultant.