If you’re reading this, you’ve made it to October in one of the wildest years on record. I know it’s hard to imagine but we are just over 2 months away from a fresh start in 2021. I know this year has been particularly complicated for business owners and executives and I hope everyone has had a chance to unplug and relax, even if it wasn’t your normal vacation plan. Now that 2020 is approaching the finish line, the question becomes, what do we need to do to prepare for 2021? Below are some tips and to-dos to prepare for the new year.
- Did your plan have any CARES Act loan suspensions? If so, remind your team that those repayments need to start in January and have the loans re-amortized to begin on the first pay of 2021.
- Did you have any furloughs or turnover? If so, reach out to your TPA to see how they want those to be reported on the annual census. Then start collecting the information they need to make your reporting easier come January.
- If you are a Safe Harbor plan, don’t forget to send the required annual Safe Harbor Notice to all eligible employees. Your TPA and/or recordkeeper can generally assist with this process, although there may be a fee.
- If you have any other notices to send to participants, make sure you know which disclosures and notices are required and send them out to your team. It could be a best practice to include these on any year-end communications to your team.
- Did you suspend the plan’s match or Safe Harbor contributions via the CARES Act? If so, you should reach out to your TPA to request that they prepare a mid-year test (this could incur a fee, so check before requesting) so you can plan for any required contributions and include those in your budget for 2021.
- Did anyone on your team stop deferring to the plan during the pandemic? If you’ve returned to normal operations, send a note to your team reminding them they can restart those contributions, according to your plan document.
Lastly, Morningstar released an article at the beginning of September titled 100 Must-Know Statistics about 401(k) Plans and I wanted to draw your attention to two statistics I found interesting.
- The National participation rate in qualified plans is 56%. If this was a 2020 statistic, I would tell you that may be an outlier, however, this is from the end of 2019 when the market and economy were both healthy. This means that 44% of the workforce isn’t participating or saving towards their retirement.
In my opinion, one of the best ways to beat that statistic is by providing robust financial education to your team throughout the year. We have several approaches to this that have been very successful for our clients and I would be happy to share these with you.
- Only 58% of plans include a target date fund series. Target date funds are created almost exclusively for qualified retirement plans and provide a great investment option for participants to utilize that changes with their career’s glidepath. While target date funds are a great option, not all are created equal and it’s important to consider the structure of your business and demographics of your team when selecting the appropriate series for your plan and participants. We have done a great deal of research and have a very defined process when selecting these series for plans. We would love to share how that works.
If you have questions around the CARES Act or how to engage participants around resuming deferrals following a furlough, we are here to help! If your plan does not currently offer a target date solution and you would like to evaluate what best fits your team, we are here to help! Even if you just need a second opinion, I would be more than happy to meet with you and review your plan. Please let us know how we can assist in making your retirement benefit offering, robust and meaningful to your team.
Written by Matt Kruckenberg, Manager of Retirement Plan Services. Matt can be reached at 614-907-8639 or email@example.com