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Glass Half-Full: Prospecting Tips   


All 401(k) plans, except for those few using individually designed plan documents, are now in the middle of a required restatement period.  The restatement deadline, April 30, 2016, offers an opportunity to prospect new business and to add value to existing relationships. 

All retirement plans using pre-approved plan documents (prototypes and volume submitter documents) are required to be restated every six years for law changes.  The window during which each restatement is open is two years.  When a plan is not restated by the deadline, the employer, and possibly the fiduciaries (generally owners and trustees) become subject to penalties and additional costs.  The plan may be subject to disqualification.  Each of these options is expensive, and the deadlines should be considered as serious. 

For defined contribution plans, including 401(k) plans, profit sharing plans and money purchase pension plans, the restatement window opened the summer of 2014 and will close on April 30, 2016.  Now is a perfect time for you to remind clients and prospects of these requirements and to offer suggestions on how to improve their plans.  These improvements normally would require plan amendments, which typically involve some cost.  These improvements, however, may be incorporated into these restatements, avoiding the separate amendment fee, effectively killing two birds with one stone.

Some questions which can serve as conversation starters for your clients or prospects are:

  • Are there any modifications you wish to make to your plan?
  • Are there any features you would like to add to your plan?
  • Are you interested in seeing whether the plan might be able to do more for you than it’s doing today?

Specific changes that often need review include:

  • Taking advantage of automatic plan features which may have become available after this plan was established:

    1. Automatic enrollment and escalation to move employees toward a more secure retirement,
    2. Improved automatic investment defaults, or
    3. Automatic pay-outs of smaller account balances to minimize longer term plan costs.
  • Minimizing testing concerns and eliminating refunds to owners and highly compensated employees:

    1. Safe Harbor 401(k) plans,
    2. Implementing automatic enrollment (mentioned above), or
    3. Updating employee enrollment meetings to remind employees of benefits of plan participation.
  • Reviewing specific plan features that are popular with employees:

    1. Loan programs
    2. Adding a loan program, or
    3. Limiting the number of loans a person may have at one time.
  • In-service withdrawals

    1. Adding an in-service withdrawal program, especially at age 59½, or
    2. Considering a hardship withdrawal program for the benefit of employees.
  • Adding Roth Accounts:

    1. Employees can choose to fund after-tax deferrals (allowing 100% tax-free distributions later under certain conditions),
    2. Adding in-plan Roth conversion features allowing employees to convert other funds to Roth accounts.
  • Ensuring your plan is up to date for any corporate / employer changes:

    1. Plans are generally required to list all participating employers and whether they are members of a controlled group of companies.
    2. Anticipated ownership and corporate changes can lead to planning opportunities as well as required plan document updates. (Note: Generally there are more options and choices before a corporate transaction than after.)
  • Ensuring Compensation, as defined in your plan, matches your intent and your actual practice. (Note: IRS lists this as a top leading plan audit failure, often leading to significant penalties and employer costs.)

IRS will generally assess significant penalties when they discover a plan which has not been timely restated with all signatures and dates archived in Employer records. (Note to Advisor: JULY offers plan archiving services to clients at no cost, enabling Employers to save an image of their signed and dated documents. The archived documents may be accessed on-line immediately and on demand.)

Action Items

Request a copy of the plan document.  Suggested prospecting language might be something like “With all prototype 401(k) plans being required to restate their adoption agreements, this is the perfect time for a plan review.  Let me help you go over the provisions in your plan to see if there are changes that could improve the plan, lower costs, or help you achieve your goals more effectively… to make the plan work better for you.”  

To nail down the Employer’s goals, ask what the uppermost objective is, in his mind, for sponsoring this plan.  This might be something like “Walk me through whether you’re most interested in tax deductions, in larger contributions for yourself (and owners), in recruiting and stabilizing your workforce, in reducing costs, or simply in helping your employees prepare for their retirement.”  Those Advisors who wish to bring up 3(21) or 3(38) topics could ask if the Employer is interested in reducing fiduciary risks. 

For JULY clients we offer several pricing choices, each with its own Agreement.  For clients wishing to lower overall plan costs, ask your Sales Consultant about ERISA Care.  It includes a package of the most common plan document needs at a fixed price considerably lower than a la carte pricing. 

Try to find out whether the Employer’s contributions are in the desired range, or whether the Employer is having to fund too much, or on the other hand, would like a much larger deductible contribution.  Also ask whether these contributions are being allocated among the employees as desired. 

Ask whether the company has been through an ownership change or corporate restructuring recently, or whether this is contemplated in the near future.  If so, ask whether someone has reviewed their 401(k) plan documents to ensure they consider these changes. 


Now is the perfect time to ask prospects about 401(k) restatements.  The deadline for signing is still nearly a year away, but this allows better timing for discussion and planning. 

Your JULY Sales Consultant is prepared to help you with this.  When needed for more complex matters we will involve one of our ERISA Consultants.  Please let us know how we can best support the growth of your 401(k) practice.