When You Have Failed Your Discrimination Testing

Question: Our company-sponsored retirement plan failed discrimination testing this year and its costing us over $1 million since we are adding additional funds on behalf of lower compensated employees to rectify the imbalance between our lower compensated employees and our higher compensated employees. What can we be doing to prevent this from happening next year?

Answer: This is a great question. Here's what we've found works the best:

• Do a demographic analysis of your company. Figure out which departments and offices have the highest percentage of lower compensated employees who are not participating.
• Target the departments who have the highest percentage of lower compensated employees who aren't contributing with a comprehensive plan communication and financial education program. Use multiple methods of communication and education: print materials, e-mail blasts, information on your company intranet, live workshops on retirement planning, investing and basic money management, and financial counseling for employees with specific questions.
• Conduct focus groups with these employees to determine why they aren't participating and ask them for their recommendations on how your company can increase plan participation. Seriously consider all recommendations: employees often have the best recommendations on issues that directly affect them.

Passing discrimination testing is not easy and it isn't a problem that can be rectified immediately. But if you make it a priority and implement a well-executed communications and financial education program targeting those lower compensated employees who aren't participating, you should see strong improvements over time.

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About Financial Finesse: Financial Finesse is a full-service unbiased financial education company that works with Plan Sponsors and Plan Advisors to design company and plan-specific financial education programs that address the gamut of plan participant and business needs. Our award winning financial content is delivered in multiple formats: live, online, telephone, and through financial planning kits. If you are interested in learning more about workplace financial education programs, contact one of our education consultants at AskFF@financialfinesse.com.