Employee Fiduciary Releases Small Business 401k Plan Design Study

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Study summarizes the most common plan designs used by 2,767 small business 401k plan sponsors nationwide

401k Plan Design

401k plans are not a one-size-fits-all proposition...

Employee Fiduciary, LLC announces the release of a small business 401k plan design study. The study summarizes the different contribution types used by 2,767 401k plans, averaging 25 participants and $947,000 in plan assets. The study is intended to help small businesses pick the best 401k plan design for its employees given their unique needs.

“401k plans are not a one-size-fits-all proposition,” says Eric Droblyen, President and CEO of Employee Fiduciary. “Small businesses have nearly countless 401k options. During the plan design process, a company chooses amongst these options based on their 401k objectives and budget. This process can have a material impact on a company’s bottom line, so it’s important for 401k fiduciaries to take it seriously. It’s not uncommon for a company to save tens of thousands of employer contribution dollars by choosing one design over another and yet still meet their 401k plan goals.”

The plan study summarizes a number of companies that use safe harbor, automatic enrollment, Roth, matching and profit sharing contributions and how these contributions are combined to meet company needs. Some key findings of the study include:

  • 68% of plans use a safe harbor 401k plan design to avoid annual ADP/ACP and top heavy testing.
  • Only 8.71% of plans automatically enroll employees that fail to make an affirmative enrollment election.
  • 65.96% permit after-tax Roth 401k contributions.
  • 64.37% permit non-safe harbor employer matching contributions.
  • 85.65% permit employer profit sharing contributions.
  • A new comparability profit sharing contribution is most commonly combined with a safe harbor 3% nonelective plan design.
  • Pro rata and integrated profit sharing contributions are most commonly combined with the 3 match-based safe harbor 401k plan designs.

Employee Fiduciary hopes that by releasing this study, plan sponsors can feel confident that they are making the right plan design decisions for their small businesses and minimize their 401k contribution expenses. “Over the past 20 years, I’ve designed thousands of 401k plans,” Droblyen says. “One of the most common questions I receive from small business 401k fiduciaries during the plan design process is 'what are other people doing?' This study is intended to help answer that question.”

About Employee Fiduciary

Employee Fiduciary, LLC, founded in 2004, is a 401k plan provider for small businesses headquartered in Mobile, AL. Employee Fiduciary provides low cost 401k plan record keeping and administration services to nearly 3,000 small and growing businesses nationwide. For more information, please visit http://www.employeefiduciary.com.

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Holly Roussel-Godfrey
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Employee Fiduciary
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