We ran into a 401k plan sponsor who had been routinely refunding over $30,000 in plan contributions made by their highly paid group. We met with the Advisor and sponsor to obtain their objectives in sponsoring the plan, and what they hoped the outcome could be.
By focusing on the top 20% of highly paids as opposed to just the defined term “Highly Compensated Employees”, we were able to reconstruct the plans formulae and eliminate the refunds. Our consultative approach rather than a one size fits all plan design is now making the plan far more effective for the sponsor, and for the executive group.
BEST Practice Learned
Many, many plans you run into out there contain minor or major design flaws. Advisors and sponsors need to find qualified consulting firms who have experience with many types of plans, sponsors and are solution providers. There is often times a nice solution for most plan issues.