Insight for Designing a Qualified Retirement Plan for a Standard of Excellence

Our mission to “Define a Retirement Plan Standard of Excellence” is reflected in our past blog posts, and the attached white paper from Russell Investments addresses several key elements of the Standard.

The second element of the Standard is to inspire participants to save for retirement.  As pointed out in the white paper, too few participants are enrolled compared to the number of participants who are eligible to participate.  In addition, their savings rate is not high enough to reach the appropriate income replacement goal at retirement.

The document restatement cycle will begin in 2021; therefore, this would be a perfect time to review the plan provisions and consider implementing automatic enrollment and automatic escalation provisions in the restated plan document.  Auto features tie in nicely with the 7 attributes for defined contribution 401(k) plan excellence outlined on page 14 of the document.

The white paper outlines the responsibilities of governing the qualified plan; you can see all the details on page 24.  It is important for plan fiduciaries to understand their roles and responsibilities and decide if they want to retain or outsource those responsibilities to a qualified third-party expert.  A properly governed plan will create the greatest opportunity for the participants to reach their retirement income goals.

Recently, the Secure Act was signed into law, which will require all participant statements to reflect a projected monthly income for the participant.  As you can imagine, there are many ways to calculate a monthly income amount.  As a result, the DOL recently issued a proposed regulation which outlines the assumptions all recordkeepers have to use in order to properly illustrate the projected monthly retirement income amount. Up until now, only lump sum values were shown on participant’s statements, which mislead participants on how long their retirement assets would last once withdrawals began.   In my opinion, this is going to create a significant opportunity for qualified plan professionals to provide participants with the resources and knowledge to reach their retirement income goal.

In conclusion, the white paper provides substantial insight on how to design a qualified plan to “Define a Retirement Plan Standard of Excellence.”

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By Jeff Atwell, AIF, C(k)P, CPFA , Principal, TRG Fiduciary Services, LLC


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