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Plan Sponsors of small & mid-sized Retirement Plans need to take note of the Top 4 Plan Design features for 401k plans.

Auto-Features are the future of 401k plan design. Utilizing Auto-Features can dramatically help your employees save for a successful retirement.

TOP 4 AUTO-FEATURES:

1. Auto-Enroll – This feature automatically enrolls participants in the 401k plan once they are eligible. Typically, plans Auto-Enroll at 3%, but in my opinion, this should be at least 6%.

2. Auto-Escalation – Once enrolled in the plan, the participant’s contribution is automatically increased on an annual basis. Typically, plans automatically increase the contribution by 1% annually to a preset maximum. 10% is a popular ceiling for most plans.

3. Auto-QDIA – Most plans have a Qualified Default Investment Alternative (QDIA). The QDIA acts as the default fund for the plan if a participant doesn’t actively select their investment options. QDIAs are typically an asset-allocated investment option like a target-date fund or risk-based fund. I believe plans should automatically default their employee’s investment selection to the QDIA to assist them with making good investment decisions.

4. Auto Re-enroll – All Auto-Features can be opted out of. To avoid letting employees fall through the cracks, the plan should re-enroll their employees to the default contribution % elected for Auto-Enroll. This will also re-enroll them in the QDIA investment option and thus make sure every employee is given the opportunity to save successfully. Re-enrollment is typically done on an as-needed basis or, in some cases, annually.

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