With the new year, employees may be considering how to save more money and often times that includes bolstering their retirement savings.
Depending on their 401 (k) savvy or type of investment account, questions may range from simple to complex and plan sponsors should be readily able to answer them. However, plan sponsors should be wary of answering questions that exceed their expertise.
Bukaty Companies has identified five common questions employees ask about their 401(k) plan with tips on how employers can be prepared to respond.
- What kind of investments are available and how do I manage them?
Employees might seek to better fully understand their investments and if they are performing at peak efficiency. With alternatives such as, bonds, individual stocks, money market or even a Roth 401(k), employees will want to know their options and if they have the tools to ensure their portfolio is sufficiently diversified. If they have access to a financial advisor, online tools, or outside educational resources, provide the information to steer them in the right direction.
- What are my fees and can they be lowered?
People know there’s no such thing as a free lunch. Intuitive employees will want to know of the fees involved with various investments in their plan and even savvier ones might try and negotiate lower-fees, especially on those investments that have preset portfolios and should be cheaper. - When and how can I withdraw money from the plan?
Employees may simply view their 401(k) as an additional savings account but also know there might be stipulations to its use. Should the need arise, they’ll want to know if withdrawing funds can be for an emergency or non-emergency cases, if it’s a difficult or long process, or if their plan even allows withdrawal. The allowed use of funds in their 401(k), the process, and any fees or penalties that could be applied should be directly outlined. - What is the employer matching contribution and when am I vested?
If they don’t already know, employees will want to know how much of their contributions will be matched by their employer. Whether it’s 50 cents per dollar or up to a capped percentage, that information may affect how much they contribute to their plan. It’s common knowledge that whatever funds they personally contribute is theirs to take if leaving for a new job, but vesting rules vary from company to company. Some plans may be fully vested at 5 percent per year or 100 percent only after a certain number of years.
- What are the eligibility requirements?
Ensuring employees understand the requirements for participation is vital. While new employees in particular may want to know the specifics, existing employees that had not enrolled in the past may also be wondering if they’ve been with the company long enough or if they clock enough hours per week to start contributing. Many companies have implemented an auto-enroll feature to avoid eligible participants being overlooked.
If your company provides a 401(k) plan for employees, it’s important to understand your fiduciary obligations as it relates to employee education and investment advice. If your business lacks the expertise to address its fiduciary responsibilities, it’s best to work with a professional who is licensed and trained.
For more information, contact Bukaty Companies Financial Services President Vince Morris at 913.338.5300.
