Because 401(k)s are such an important benefit, employees are likely to have many questions about how the plan works and how they can make their money grow. Your supervisors should be able to field basic questions about your 401(k) plan and help employees learn what they need to know to make informed investment choices and comply with the rules of the plan.
Although some of your supervisory staff may already understand the ins and outs of your plan, it’s best to be certain and train all supervisors to make sure they have the information they need to provide employees with accurate and up-to-date information about your 401(k) plan.
Training Exercise
Have your trainees complete the worksheet below.
1. Briefly explain what a 401(k) plan is.
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2. Identify three advantages of 401(k) plans.
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3. What are the eligibility requirements for participation in the 401(k) plan?
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4. Briefly describe how employees’ 401(k) contributions are handled.
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5. Identify three investment options that may be available in a 401(k) plan.
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Guidance
Discuss the results as a group and answer any questions.
1. A 401(k) plan is an employee-funded retirement plan. It operates as a special kind of savings and investment plan established by employers under the federal tax code. Plans allow employees to invest pretax dollars for retirement and defer taxes on earnings.
2. Advantages of 401(k)s include:
- Tax-deferred earnings
- Reduction in current gross income
- Automatic payroll deductions
- Control over account
- Portability
- No minimum investments
- Loan options
- Matching contributions
3. To be eligible to participate in a 401(k), an individual must:
- Be an employee (temps, independent contractors, and the like do not qualify).
- Be at least 21 years old.
- Meet the time-in employment requirement.
- Explain any other eligibility requirements under your plan.
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4. Contributions to 401(k)s go into a special trust fund for employees. Money in the fund is invested in different ways. Contributions buy shares in the fund’s investments. Shares go into an account in the employee’s name.
5. Investment options vary depending on the employer’s plan. The following investment options may be available:
- Aggressive growth funds
- Balanced funds (both stocks and bonds)
- Bond funds
- Employer stock
- Growth and income funds
- Growth funds
- International and global equity funds
- Money market funds
- Mutual funds
- Stable value funds
- Stock index funds
- Explain only the funds available in your plan
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