We hope you enjoy these helpful articles about retirement planning, investment management, tax planning, and business issues.

Stop Plan Leaks

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When employees know that they can dip into their retirement plan  accounts before retirement, if necessary — either through a plan loan or  a hardship withdrawal — that can be the reassurance some need to join  and contribute to your 401(k) plan. But you don’t want your plan  participants to view your plan as a household emergency fund to be  used for any unexpected expense. Here are some ways you can slow the leakage of retirement assets from your plan.


Reduce Excessive Plan Loans

When they take a plan loan, many participants reduce contributions to the plan or stop them altogether. You may be able to decrease requests for plan loans by limiting the number of loans a participant can have outstanding at one time and/or the amount a participant can borrow. Educating participants on the pitfalls of taking a plan loan can also be helpful.

Restart Contributions After a Hardship Withdrawal

The problem with hardship withdrawals often isn’t the effect of the distribution but, rather, participant inertia about restarting contributions. Plans generally must suspend employee contributions for six months after the withdrawal. As a matter of plan design, you can address this problem by automatically restarting the employee’s elective deferrals when the suspension period ends. You might also send messages to employees who made hardship withdrawals that encourage them to restart contributions.

Encourage Rollovers

One risk of damaging the retirement security of participants may come from the failure to roll over previous employer’s retirement account and instead, taking a cash distribution. Use your employee education program to encourage new employees to directly rollover balances from their former employers’ plans to your plan (if it accepts rollovers). In addition, encourage retiring employees and other employees leaving your company to directly transfer or roll over their account balances to an IRA or another employer’s plan.

To learn more about retaining plan contributions and rollovers, contact a Lumin Financial advisor.

Disclosure:  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific investment, or investment strategy. Investments involve risk and are not guaranteed.  Information has been gathered from sources believed to be reliable, but cannot be represented as accurate or complete.  Before investing, you should consult your investment, tax, or legal advisor.

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Investment advisory services offered through Lumin Financial LLC, which is an independent Registered Investment Adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed on this site.