Finance chiefs are being asked to pay more attention to their companies’ 401(k) plans than ever before. And in some cases, they can even be held personally responsible if the investments aren’t in employees’ best interests.
And with DOL rules on target-date funds (TDFs) and the expanded definition of “fiduciary” expected in the near future, 401(k) compliance will play a key role in 2014.
Plus, more employees are looking for increased retirement guidance from their employers.
What matters most
To prevent any problems down the road and keep employees on track to retire, consider following these 401(k) best practices suggested by Mercer:
1. Stop relying on stale metrics. More employers rely on stats such as participation rate and deferral rates when it comes to communicating with employees about their 401(k). But those metrics generally don’t get workers to ramp up contributions.
Another option: List the number of employees who have 401k savings of $10K, $20K, 50K-100K, etc. When an employee sees how far behind most of the company he is in terms of savings, it may just be enough to get him to ramp up his deferral rate.
2. Revisit target-date funds (TDFs). Most firms now offer some type of TDFs within their 401(k)s, and the DOL is putting these popular investments under the microscope.
To make sure your plan’s funds would pass muster with the feds, check out the DOL Target Date Retirement Fund Tips for Plan Fiduciaries.
3. Look to end revenue-sharing. When some employees pay higher investment fees simply because they choose funds that pay revenue-sharing, it can raise some red flags and lead to suspicions about a lack of transparency or that the plan sponsor isn’t offering the lowest fees available.
4. Consider new channels. Like they do with wellness plans, firms should start looking at using all available channels and tactics (mobile tech, social media, gamification, etc.) to educate workers about their 401(k) plans.