2020 is finally coming to a close (good riddance), therefore it’s time to start thinking about the year ahead. For employers and businesses, this means thinking about the future of their company and their employees. This year was anything but ordinary to say the least, but when you add a heated election into the mix, what does this mean for plan sponsors? Here are four things every plan sponsor should be thinking about for 2021.
1: Frequent Communication
This goes without saying, but we'll go ahead and say it....First and foremost, make sure you are communicating effectively with your employees, even with those who have been laid off or furloughed due to COVID-19.
If you are still in contact with those who no longer work for you, remind them of the resources they have to cover expenses as we move into 2021 - especially as many CARES Act benefits come to an end.
Remember that in these difficult times, it's better to communicate more than you usually would so that your employees feel as little stress as possible. Offer reminders about your employees' retirement plan options, including contribution limits, matching contributions and the potential to tap into their 401(k) if necessary to cover certain expenses.
2. Optimize Your Retirement Plan
Plan sponsors should evaluate how their retirement plan design can improve the financial well-being of employees and how much income they can expect to receive in retirement. A thorough evaluation of plan health can be performed during your annual 401(k) review with your advisor, or you can do it internally. However, you may need the advisor or recordkeeper to provide some key data for a meaningful evaluation of plan health.
You can evaluate your plan by following these steps.
- Review your plan’s health (a plan’s participation rate is one of the best, and most common indicators of 401(k) health)
- Review investment offerings and performance (to make sure that the line-up is appropriate for your company’s employees and where participants are invested appropriately for their circumstances)
- Review operational compliance (are employees being enrolled in the plan as they become eligible, are participants receiving the correct employer match? etc.)
- Review costs and compare against other vendors and plans within the same industry and size to see where your plan compares
- Review your participants’ education and communications so you can see what is working and what is lacking
When it comes to retirement plans, some additional tips to keep in mind are:
- Understand what your plan does and doesn’t cover; check with your current 401(k) plan advisor (if you have one) or plan provider to make sure you know the facts.
- Continuously communicate with your plan provider/plan advisor and if this has been a problem in the past, consider making a switch
- Make sure you are maintaining your plan and keeping up with your fiduciary responsibilities
- Rules are always changing, so stay on top of any changes that are being made, consult with a plan advisor or tax professional for the most up-to-date rules.
- Hire a specialized retirement plan advisor who can share in your responsibilities and help you manage compliance requirements.
What If You Have to Suspend Your Plan?
With the coronavirus pandemic, some companies have suspended employer matching contributions. Doing this can be a short-term fix for some cash flow issues that your company is facing during this time, but before doing this, review your plans and figure out what your best options are.
If your company has discretionary, non-elective matching contributions, those can likely be suspended immediately without amending plan documents. Make sure your company has a communication strategy in place to let employees know.
Figuring out what to do for not only your business but also your employees is incredibly important. It’s crucial that you find a plan that works best for you and your employees. While it’s always been a huge part and incentive of jobs, as we have been navigating the uncertain times of 2020, it’s more important than ever to prepare for 2021 as a responsible plan sponsor.
3. Health Insurance Plans
It’s likely the pandemic has affected your business and your employees - whether you’ve shifted to working remotely, were forced to furlough or you had to close your doors for weeks at a time (although the residential real estate sector has been busy). Unlike years before, we’re at a tough crossroads as we head into the new year. Should you (and can you afford to) offer health insurance to your employees for the new year?
If you’re offering automatic re-enrollment to employees, now is the time to review and update your offerings if needed - especially if you’re looking to offer more suitable coverage to help those affected by the pandemic.
4. Reevaluate Your Wellness Plan
Wellness programs are a new trend for companies to improve the health and productivity of your employees. By helping your employees to improve their health, this can ultimately improve the overall cost of employer-provided health care.
These programs can benefit employers by:
- Lowering health care costs
- Reducing absences at work
- Achieving higher productivity from your employees
- Reducing workers' compensation and disability costs
- Reducing injuries
- Improving the overall employee morale
If you don’t have one yet, determine if there’s room in your business’s budget to begin offering one to employees. Develop goals and objectives and work towards those plans to make your program a reality at work.
Each plan has unique requirements, and you should consult with your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. #1-05077352
Joseph Cappuccino is a registered representative with, and securities and advisory services offered through LPL Financial. A Registered Investment Advisor. Member FINRA/SIPC