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By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

As a 401k plan sponsor you have no doubt embraced the concepts of retirement readiness. A significant part of helping employees achieve retirement readiness is providing a 401k plan with features that guide participants down the path to retirement readiness. The following 401k plan attributes are generally found in a retirement ready 401k plan:

Attributes of Retirement Ready 401k Plans

Plan design

1. Auto-enrollment. Automatic enrollment of all new participants at a default contribution percentage of at least 3%.

2. Auto-escalation. An increase in participant contribution percentages of 1% per year, typically up to a maximum of 10%.

3. Auto re-enrollment. Automatic enrollment each year of any participant who opts out of initial enrollment at their time of hire or who stops contributing during the year.

4. Hardship withdrawal provisions for loans. In an effort to plug leakage, requirement of hardship withdrawal criteria in order to take a participant loan.

Contributions

5. Roth 401k availability. Retirement ready 401k plans allow participants to elect to make after-tax Roth 401k contributions.

6. Extended employer match. An employer match spread over a larger percentage of employee contributions. For example, 25% of the first 12% rather than the standard 50% of the first 6%.

7. Catch-up contributions. For those participants age 50 and older, the opportunity to make additional 401k catch-up contributions.

Investments

8. Availability of index funds. Retirement ready 401k plans offer a selection of passive investment options.

9. Right number of fund choices. More is not better with regard to fund choice. More is confusing. Most experts feel that retirement ready 401k plans should offer around 12 investment fund options (not including target date fund options).

10. Availability of target date funds. Professionally managed target date funds for those participants who prefer to have someone else manage their account.

How many of these retirement ready features does your 401k plan have?

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About the Author
Robert C. Lawton, AIF, CRPS is the founder and President of Lawton Retirement Plan Consultants, LLC. Mr. Lawton has over 30 years of retirement plan consulting and administration experience and has provided consulting services to many Fortune 500 companies including: Aon Hewitt, Apple Inc., AT&T, First Interstate Bank, Florida Power & Light, General Dynamics, Houghton Mifflin Harcourt, IBM, John Deere, Mazda Motor Car Company, Northwestern Mutual, Northern Trust Company, Trek Bikes, Tribune Company, Underwriters Labs and many others. Mr. Lawton may be contacted at (414) 828-4015 or bob@lawtonrpc.com.

About Lawton Retirement Plan Consultants, LLC
Lawton Retirement Plan Consultants, LLC is a Milwaukee, Wisconsin-based independent, objective Registered Investment Advisory (RIA) firm providing investment advisory, fiduciary compliance, employee education, vendor management and plan design services to 401(k) plan sponsors. The firm currently has contracts in place to provide consulting services on more than $400 million in plan assets. For more information, please contact Robert C. Lawton at (414) 828-4015 or bob@lawtonrpc.com or visit the firm’s website at: http://www.lawtonrpc.com. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser.

Important Disclosures
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance, tax, legal or investment advice. Each plan has unique requirements and you should consult your attorney or tax adviser for guidance on your specific situation. In no way does Lawton Retirement Plan Consultants, LLC assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. Investors should carefully consider investment objectives, risks, charges and expenses. The statements in this publication are the opinions and beliefs of the commentator expressed when the commentary was made and are not intended to represent that person’s opinions and beliefs at any other time. The commentary does not necessarily reflect the opinion of Lawton Retirement Plan Consultants, LLC and should not be construed as recommendations or investment advice. Lawton Retirement Plan Consultants, LLC offers no tax, legal or accounting advice and any advice contained herein is not specific to any individual, entity or retirement plan, but rather general in nature and, therefore, should not be relied upon for specific investment situations. Lawton Retirement Plan Consultants, LLC is a Wisconsin Registered Investment Adviser and accepts clients outside of Wisconsin based upon applicable state registration regulations and the “de minimus” exception.