There are many weak small business 401(k) plans.
Many plans worked fine when they were originated. However, as the plans grew, costs may not have stayed competitive and features may not have been added that are available today.
Financial advisors that recommend plans to plan sponsors are financially liable for being a fiduciary for their plan.
Compare the plan you offer with the following description of the features of a perfect 401(k) plan:
1. Participants are automatically enrolled in the plan. Participants can have the option of opting out of the enrollment but have to actively choose that option. This increases participation.
2. In order to encourage maximum participation, the plan sponsor makes a safe harbor match for all employees.
3. The plan allows an automatic annual deferral increase for those that do not elect the maximum deferral at sign up. This encourages participants to continue to save at the recommend savings rates necessary for a reasonable retirement. Participants can opt out of the deferral increase at any time.
4. Participants can choose a limited set of diversified portfolios that vary in risk and return. These portfolios are rebalanced annually to maximize investment diversification and minimize participant confusion.
