Commentary: For more than 30 years I have helped plan sponsors with their 401(k) plans. During that time I have noticed that the best plans appear to possess the following seven attributes:
1. Reasonable cost. Your plan does not have to be the
2. Participation. The best plans now have at least 90% of employees with account balances. How did they achieve 90% participation? Auto-enrollment.
3. Participation and contributions. Participation can also be measured by the percentage of employees who are actually contributing. The best plans have at least 80% of employees making contributions.
4. New employees roll money into the plan, departing employees leave their balances. The best plans are the best for a reason. Many provide access to investment opportunities that just aren’t available anywhere else. For example, a number of years ago I worked for a large life insurance company that offers a guaranteed-rate fund in their 401(k) plan. Since the fund is subsidized by the company, it continues to pay over 4%, even in this low interest rate environment. What a deal!
5. Employees “get” the plan. The best 401(k) plans are well understood by their plan participants. They tend to have straight-forward
6. The fund line-up has a home for everyone. I believe there are
7. The leaders in your company talk about the plan. All of the best plans, without exception, receive significant support from their company’s leadership team. These individuals not only talk about the plan at official corporate gatherings, they feature it as a recruiting and retention tool in their everyday conversations.
There are probably
Robert C. Lawton, AIF, CRPS is president of