How long ago did your longest-employed 401(k) plan participant select their investments and allocation? A few months ago, or perhaps a few years? Do you know?
Many employees tend to select their investments and allocation upon initial enrollment and then “set it and forget it”, not revisiting their selections as they age or as major life events which affect finances occur (divorce, receiving inheritance, etc.). When this all-too-frequent situation happens, not only could your participants be suffering, but you may be exposed to additional fiduciary liability. One of the best ways to remedy this inertia is to perform a plan re-enrollment, which is the process of soliciting your participants to reconfirm their investment selections. This will prompt employees to review their investments and make any adjustments as needed. Those who do nothing will have all future contributions invested in the plan’s Qualifed Default Investment Alternative (QDIA), usually a suite of Target Date Funds or other asset allocation models/portfolios, which will help to ensure the participant is appropriately allocated based on their date of birth and when they will retire.
Although this is a great practice which helps participants and Plan Sponsors alike, many Plan Sponsors are hesitant to perform re-enrollments due to various misperceptions. Check out the infographic below, from J.P. Morgan, which debunks the most commonly-held misperceptions while illustrating the powerful reasons to utilize re-enrollment for your plan.
Representatives offer products and services using the following business names: Summit Group of Virginia LLP – insurance and financial services | Ameritas Investment Company, LLC (AIC), Member FINRA/SIPC – securities and investments | Ameritas Advisory Services (AAS) – investment advisory services. AIC and AAS are not affiliated with Summit Group of Virginia LLP, or J.P. Morgan Asset Management. Products and services are limited to residents of states where the representatives are registered. This is not an offer of securities in any jurisdiction, nor is it specifically directed to a resident of any jurisdiction. As with any security, request a prospectus from your representative. Read it carefully before you invest or send money. A representative will contact you to provide requested information. Representatives of AIC and AAS do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your situation.
