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Payroll Today

How’s your 401(k) plan doing?

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Alice Gilman

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in Payroll Today

There are two core problems with 401(k) plans: getting enough employees enrolled and helping retirees to not outlive their retirement savings. Lots of government agencies are looking into these issues right now.

So long, it’s been good to know ya

Last year, the IRS released final regulations that allow 401(k) plans to offer qualified longevity annuity contracts, sometimes called deeply deferred annuities, as an investment option. These annuity contracts kick in when a retiree reaches age 85. This way, retirees won’t outlive their savings—an issue that’s gotten a lot of buzz recently, as baby boomers approach retirement age.

The General Accountability Office (GAO), the nonpartisan investigative arm of Congress, is also looking into the lifetime investment options that plan sponsors offer retirees as they draw down their retirement savings. It’s created an online survey and is inviting plan sponsors to participate. The survey will be open until July 24. It estimates that it will take you 15 to 20 minutes to complete the survey.

Point your browser to https://tell.gao.gov/lifetimeincome401k.

Everybody into the plan

Another pressing issue is getting employees to participate in a 401(k) plan in the first place. All 401(k) plans must meet certain eligibility and vesting requirements. However, owing to inertia on employees’ part, the IRS and the Department of Labor also allow plans to automatically enroll employees and deduct contributions from their pay. To encourage more auto-enrollment plans, the IRS recently set up safe harbors for plans that make inadvertent mistakes with employees’ pretax contributions.

A second online GAO survey seeks information on eligibility requirements for plan participation. This survey will also be open through July 24 and shouldn’t take you more than 15 to 20 minutes to complete.

Point your browser to https://tell.gao.gov/eligibilityandvesting.

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