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November 2017  Volume 15, Number 11        

Why You Should Consider Re-Enrolling Your Employees in Their 401(k)

Once you establish a 401(k) retirement plan for your employees, you might think your work is done. However, despite your retirement plan carrier’s best efforts to educate employees on how to make good investment decisions, many employees do not have appropriately diversified portfolios.

One way to improve their retirement plan returns is to move all assets into a Qualified Default Investment Alternative (QDIA) managed by investment professionals. These plans are reviewed annually and rebalanced.

QDIA plans that also feature a Target Date Fund (TDF), which is based on each employee’s birth date, have the advantage of ensuring that every employee is on the right investment path for their age. This eliminates the problem of older employees having contribution allocations that are too risky, and younger employees having investments that are too cautious.

To conduct a plan re-enrollment with a default fund, work with your agent and notify plan participants that their existing assets and future contributions will be invested in the plan’s QDIA. Employees who are more sophisticated investors and don’t wish to participate can choose to make their own investment elections. Once you have conducted a re-enrollment into a QDIA, you will need to distribute annual notices confirming that participants have the right to make their own investment decisions.

Setting up a QDIA also provides benefits to you, as the employer:

  • This plan may relieve you from certain fiduciary responsibilities
  • QDIAs help reduce the anxiety of employees who are not comfortable making investment decisions
  • Your employees will have a more secure retirement future and may be more willing to retire early or on time

There are four types of QDIA you can choose:

  • A lifecycle or target date fund
  • A professionally managed account
  • A balanced fund based on the characteristics of the group instead of each member’s profile
  • A stable value fund, which is a portfolio of highly rated corporate or government, short-term and intermediate-term bonds which come with principal protection.

To learn more about setting up a QDIA, please contact us.

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In this issue:

This Just In...

Your EEOC Responsibilities as an Employer

What to Look for Before Signing a Group Health Plan Contract

What Type of Group Health Plan is Right for Your Company?

Why You Should Consider Re-Enrolling Your Employees in Their 401(k)



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