BEST PRACTICES: Defined Contribution Retirement Plan Design Flashcards
Retirement administrators and finance professionals should include appropriate design elements should an employer choose to provide a defined contribution (DC) plan as the primary retirement vehicle.
What should be determined for employees in a defined contribution plan?
Whether employees are eligible for a federal insurance program that provides benefits to retired people, such as Social Security.
What analyses should be conducted for a defined contribution plan?
A full actuarial analysis based on workforce demographics and the desired level of replacement income to determine the related cost of providing the benefit.
How can tax deferral be provided to employees in a defined contribution plan?
Through the use of mandatory employee contributions.
What should be evaluated to increase employee participation in a defined contribution plan?
Possible employer matching; determine if an employer match will be offered and the formula most likely to accomplish the desired level of contributions.
What system should be instituted in a defined contribution plan?
Automatic enrollment and default investment options.
How should plan contributions be established in a defined contribution plan?
Based on a percentage of pay, rather than a flat dollar amount.
What should be created for employee contributions in a defined contribution plan?
An automatic increase to employee contributions, which could be annual or tied to pay increases.
What governance structure should a defined contribution plan have?
A structure that provides for an annual review of plan design elements including investments and services, conducted independently of the plan provider.
What should be established in terms of investment structure and policy for a defined contribution plan?
A sound investment structure and policy that addresses the reasonableness of fees and the quantity and quality of investment options.
What program should be developed for a defined contribution plan?
A participant education program, including its development, implementation, and monitoring for effectiveness.
