Here’s the irony of the tax saving incentive. If it’s wildly successful and leads to very large retirement accounts, the required minimum distributions at retirement may place the now retired employee in a higher tax bracket than the one experienced while working.
Plan Sponsors
Retirement plan sponsors may also benefit from teaching entrepreneurial skills to their employees. Such lessons could also provide employees with opportunities to begin to practice what they learned directly for their current employer.
From an employer perspective, it’s not just about the 401k plan. There are greater realities that must be dealt with. Different firms, however, will find distinct—and differing—realities.
It’s critical that plan sponsors consult with compliance professionals before adding the Deemed IRA feature.
The story arc of the 401k mimics that of software. Each release adds to and builds on features and benefits over and above those of previous releases.
There is an out, of course, but that might eliminate the so-called “institutional pricing” advantage former employees have for staying in the plan in the first place.
While retirees and near-retirees may be considering starting a small side business, many don’t have any entrepreneurial experience. How might they find answers to the questions they have?
To address this requires employers to do more than having a periodic “employee education” meeting. While these can help (see the previous article), more need to be done. Plan sponsors need to consider how they (and, more importantly, their service providers) deliver messages to plan participants.
Not only does the typical plan sponsor not have investing in employee education as a high priority, but they also likely don’t have the wherewithal to monitor the consistency of how the provider runs the education program.
How do you solve, for example, the problem of integration between the payroll software and the 401k recordkeeper’s website?
