PLANSPONSOR - October/November 2020 - 11

or vesting, she says. For them, the IRS
allows using equivalencies-e.g., if an
employee worked any time in a month, he
is credited with 190 hours for that month.
" This is a more generous way to calculate,
so some may not want to do it, but it's
administratively easier. "
As to extending employer contributions,
she says, this may be a difficult
choice; sponsors will need to weigh the
added expense against their own philosophy
about offering their employees parity.
A further concern for the sponsor,
Tavares says, is increased errors, a possibility
as it now has to keep up with parttime
hours. " Smaller plans may not realize
what they need to do internally and that
they have to send the right information to
their third-party administrator [TPA]. "
In addition, she says, sponsors need to
communicate the new 500-hour requirement
throughout their organization. " It's
not enough to modify the plan if there are
business units that continue to hire people
[who are now] over the threshold for eligibility,
and those things sometimes fall
through the cracks. All parts of the business
must be properly counting hours for
part-time employees who could become
long-term part-timers, " she says.
Plan sponsors may exclude longterm,
part-time employees from nondiscrimination
testing if those people would
have a negative impact on the results;
however, they should include them if that
will improve testing and lower refunds to
highly compensated employees (HCEs),
says Rick Skelly, a client service executive
in the retirement services division of
Marsh & McLennan Insurance Agency.
Despite the potential administration
complexities, this way is a positive
for attracting and retaining employees,
Swallow says. Having more participants
could increase economies of scale enabling
sponsors to negotiate better fees and/
or lower-cost share classes, he adds. Still,
sponsors should work with their providers
to prepare for higher administrative fees,
he says. -Rebecca Moore
TIDBITS
The Accumulation Effect
TO UNDERSTAND 401(k) participants' retirement savings trends over an extended
period, the Employee Benefit Research Institute/Investment Company Institute
(EBRI/ICI) compared a group of participants in its participant database who consistently
contributed to their plan, 2010 through 2018, against all participants in that
database who maintained retirement accounts, 2010 through 2016 (the latest data
available for the full database). Younger participants, or those with a shorter job tenure
at their current employer, tended to have a smaller account balance, while those who
were older or had a longer job tenure tended to have a higher account balance.
Consistent Contributors Accumulate Significantly
Higher Balances
l Consistent contributors
l All contributors
$151,694
$180,251
$63,756
$73,358
$60,329
2010
2011
2012
2013
2014
2015
2016
2017
Source: EBRI/ICI, " What Does Consistent Participation in 401(k) Plans Generate? "
2018
Hypothetical Trade-Off
AS IN previous years, we asked respondents to the 2020 PLANSPONSOR Participant
Survey if they would rather receive a one-time $5,000 bonus or a one-time $5,000
401(k) account contribution. Since 2017, the response to that trade-off has varied little.
The bonus won out each year-in 2018 by the peak amount of 58%.
54%
one-time
$5,000 bonus
46%
one-time $5,000
401(k) contribution
View the recently published 2020 PLANSPONSOR Participant Survey at
plansponsor.com/research.
PLANSPONSOR.COM October - November 2020 11

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