401(K) PLANS were introduced in 1978, and were never expected to become employers’ primary retirement plans.  But, as the tax and accounting rules for defined benefit pension plans focused more and more on the short term, DB plans began to decline and 401(k) plans became the dominant plan type.There’s just one problem:

Almost nobody can afford to retire on just a 401(k) plan.  That’s true even when you add in Social Security.

Fortunately, 401(k) plans can be a good component of an overall retirement package.  In 2016 salary deferrals can be as high as $18,000, plus another $6,000 in “catch-up” contributions for participants age 50 and over.  When a 401(k) plan is properly combined with profit sharing and possibly a cash balance or defined benefit plan, people can accumulate enough money to actually retire!

401(k) plan designs have evolved substantially in recent years.  Some useful 401(k) options are:

  • Automatic enrollment (with or without escalation)
  • Early-start 401(k) plan with immediate deferrals, but later match/profit-sharing eligibility
  • Safe-harbor plan design
  • Designs that encourage increased employee savings rates, such as extended match schedules
  • Coordination with a profit sharing or defined benefit pension plan to maximize retirement savings opportunities


We provide plan sponsors with a clear and independent analysis of their 401(k) plan and help you analyze 401(k) plan design from a benefit and cost perspective. You need a 401(k) plan that utilizes the latest design features to:

  • Encourage and reward employee savings,
  • Support the additional profit sharing or cash balance plans that complete the package, and
  • Keep costs within budget.


You can create a surprisingly cost-effective retirement package when you properly combine a 401(k) plan with a cross-tested profit sharing and/or cash balance plan.