Academic journal article Journal of Accountancy

Sizing Up Your Company's 401(k) Plan

Academic journal article Journal of Accountancy

Sizing Up Your Company's 401(k) Plan

Article excerpt

While there is no "typical" 401(k) plan, surveys have identified some key features that many plans have in common, including eligibility, contribution matching, investment options and withdrawals. Here are some questions employers and employees can use to evaluate their plans, along with some benchmark statistics from a survey of 401(k) plan sponsors.

ELIGIBILITY

[] What is the waiting period before new employees can enroll in the plan?

Survey results: Waiting periods ranged from 1 to 12 months; 58% required employees to wait 12 months.

[] Does the plan allow all employees--salaried, hourly, union and part-time--to participate?

Survey results: 97% covered salaried employees; 85% covered hourly employees; 69% allowed part-time employees to participate (sometimes in a separate plan); 55% of union employees participated in a separate plan.

[] Does the plan permit rollovers from other qualified retirement plans, such as those of previous employers?

Survey results: 93% accepted rollovers--almost all (92%) without a waiting period.

EMPLOYER MATCHING CONTRIBUTIONS

[] Does the employer match employee contributions to the plan?

Survey results: 88% made matching contributions.

[] How are employer contributions determined?

Survey results: The most common formula was fixed amount per dollar up to a maximum percentage of salary (63%). …

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