Midyear is a natural time for business owners to pause and ask an important question: Is your company’s retirement plan still supporting your business, your employees and your long-term goals?
Many employers think about retirement plans only during open enrollment, year-end deadlines or when an issue arises. But by then, some planning opportunities may already be limited. A midyear review gives you time to evaluate plan performance, employee participation, compliance requirements and possible improvements before the year ends. Whether your business offers a 401(k), SIMPLE IRA, SEP IRA, profit-sharing plan or another retirement benefit, a checkup can help ensure the plan remains competitive, compliant and aligned with your workforce needs.
Start With Your Plan Goals
A retirement plan should do more than simply exist. It should support your broader business goals. For some employers, the priority may be attracting and retaining talent. For others, it may be helping owners and key employees save more tax-efficiently for retirement. In many cases, the goal is a combination of both.
Start by asking whether your current plan design still fits your business. Has your company grown? Have you added employees in different roles or locations? Are participation rates where you want them to be? Are highly compensated employees able to contribute at the level they expected? If the answer to any of these questions has changed, your retirement plan may need adjustments.
Review Employee Participation and Education
Employee participation is one of the most important indicators of retirement plan success. If employees are not enrolling, contributing enough or taking advantage of employer matching contributions, the plan may not be working as effectively as it could. Midyear is a good time to review participation data and identify trends. Are new employees enrolling? Are younger employees contributing? Are employees increasing contributions over time? Are they using available education resources?
Sometimes, low participation is not a plan design problem. It may be a communication problem. Employees may not fully understand how the plan works, how much they can contribute or how employer contributions benefit them. A targeted education campaign, reminder or enrollment meeting can help employees take better advantage of the benefit.
Evaluate Employer Contributions
Employer contributions can play an important role in employee retention and plan participation. If your business offers a match or profit-sharing contribution, midyear is a good time to evaluate whether that structure still makes sense.
For example, you may want to review whether your match is competitive in your industry, whether employees understand how to receive the full match and whether your contribution formula supports your goals. In some cases, business owners may also want to evaluate whether a profit-sharing component could provide additional flexibility. Because employer contributions can affect cash flow and tax planning, reviewing them before year-end can help you make more informed decisions.
Check Compliance and Plan Testing
Retirement plans come with important compliance responsibilities. Depending on the type of plan, this may include nondiscrimination testing, contribution limits, eligibility rules, required notices, plan documents and filing requirements.
A midyear review can help identify potential issues before they become more difficult to correct. For example, if highly compensated employees are contributing at a much higher rate than other employees, the plan may be at risk of testing issues. If employee census data is inaccurate or eligibility rules are not being applied correctly, corrections may be needed. Staying proactive can help reduce the risk of penalties, missed deadlines and administrative headaches.
Consider Plan Design Updates
As your business changes, your retirement plan may need to change with it. Midyear can be a good time to evaluate plan design options such as automatic enrollment, automatic escalation, Roth contributions, safe harbor provisions, eligibility requirements or profit-sharing formulas.
These features can help improve participation, simplify testing or provide more flexibility for owners and employees. However, some changes require advance planning or must be made before certain deadlines, so it is important to review options early.
Review Fees and Investment Options
Plan fees and investment options should also be reviewed regularly. Business owners and plan sponsors have a fiduciary responsibility to ensure the plan is being managed in the best interest of participants.
That does not always mean choosing the lowest-cost option, but fees should be reasonable for the services provided. Investment menus should also be reviewed to ensure employees have access to appropriate options that support a range of retirement goals and risk tolerances. If it has been a while since your plan was benchmarked, midyear may be a good time to review costs, service providers and investment performance.
Be Proactive Before Year-End
A midyear retirement plan checkup is not about changing everything at once. It is about identifying what is working, what may need attention and what opportunities remain before year-end. By reviewing your plan goals, employee participation, employer contributions, compliance requirements, plan design, fees and investment options now, you may be better positioned to strengthen your retirement benefit and support both your business and your employees.
Contact us today to schedule a retirement plan review and discuss strategies that may help your business make the most of its retirement benefits.