Education

[Guest NancyR]

I would be very curious to know how other employers handle this? What is our obligation to educate employees on their annual max amounts into 401(k), 457(b) plans? Where is the line between personal advisor and employer administering a benefit?

Is there a line that could be crossed when educating employees on what their deferrals should be etc.....

Thank you

[ETA Consulting LLC]

Good question. I think you are a long way from that line (whereever it is). You can always state regulatory fact (i.e. the annual deferral limit for 2012 has been increased to $17K, the 415 limit has been increased to $50,000, the catch-up remains at $5,500, and you should consider these rules carefully as you make your decision). Advice would appear to be along the lines of saying given your situation, you should do this or that (this is just for starters).

There is a grey area that establishes a difference between fiduciary advice and safe harbor advice. Merely stating fact doesn't come close to that area. Remember, you're not telling them what their deferrals "should be", but merely what the limits are.

Good Luck!

[masteff]

To me, education includes the objective application of facts and theories. "Your salary is $X per year, we have 24 pay periods, so at least X% would result in the maximum contribution for the year." "You should not contribute more than X% aftertax to avoid the annual additions limit and losing out on company contributions."

Advice, on the other hand, requires the subjective application of eduction to a person's situation. "You should do Roth deferrals rather than regular pre-tax deferrals."

Now, the original post asks what is the "obligation" to educate employees about the limits. I'd say the better topic is whether someone is at risk of losing out on company contributions. At most, when you communicate the new limits each year, you could add a few short sentences about how a person could lose company contributions and say "you should review and if you need help calculating then come see me". If people don't read and review, then it's not your problem.

Scenarios that might result in losing company contributions:

Deferral too low for full match

Deferral too high with pay-period match (hit 402g limit so match stops before YE)

Plan allows high % aftertax (annual additions limit can cap company contributions)

{can anyone think of any other scenarios?}