As accountants, we often get asked, “So what are you seeing in this….” And “this” can range from all type of items; all forms of taxes, the markets, business expansion, etc. The list is endless in what we get asked!
One of those areas I get asked about is trends within 401(k) Plans. As a firm, we audit a number of these pension plans when there is an audit requirement by the Department of Labor. However, regardless of size, employees who are enrolled in a 401(k) Plan should understand their plan as this will become a large part of their retirement decisions down the road.
As a firm, we are seeing a number of items occurring that are increasing the sizes of pension plans; employers trying to grow their plans and make it a true benefit to their employees. Some of the items we are seeing include decreasing the wait time before being enrolled in the plan. In the past, it wasn’t uncommon for employees to have to wait a year before enrollment. No longer is that the case, we are seeing it as short as the following month after hiring an employee will become eligible to participate in the plan.
Also, we are seeing auto-enrollment becoming more prevalent over the past few years. This will make an employee automatically enrolled in the plan with a set percentage being withheld if they do not log into their 401(k) platform and elect out of the plan. One step further, there are some plans now being designed to increase that deferral percentage each year, up to a set limit.
As the unemployment rate continues to remain low, the competition for employees will continue to stay strong. This is an employee market! Employers continue to look for benefits, in addition to salary, to attract and retain employees.
As an employee, make sure to understand the 401(k) plan your employer is offering, take advantage of any employer match, and understand the investment options within your plan. Be sure to log into your account and verify the deferral percentage and investment options are truly what you want. Don’t hesitate to sit down with a financial advisor to go over the options within the plan to find the best fit for you.