PLANADVISER - March/April 2019 - 46

beyond(k)
When Savers Exceed the Limit
I
Strategies to help highly paid employees raise their income replacement ratio
f a defined contribution (DC) retirement plan sponsor is
aiming for every worker to reach a solid income replacement
rate, it may face a challenge with its best-paid staff.
Rank-and-file employees, with their qualified plan plus the
help of Social Security, can conceivably save enough to
replace 70% of their income in retirement. Not so for highly
compensated employees (HCEs). Between statutory limits
on their contributions, discrimination testing, and a lower
percentage from Social Security, HCEs may save far less
than what they need to approximate their current lifestyle.
" [The increasing] limits placed on savings aren't large
enough to keep pace with the compensation of senior executives, "
says Kirk Penland, senior vice president, nonqualified
markets, at Voya in San Francisco. With so much emphasis
on retirement readiness in the industry, he says, if advisers
are going to urge sponsors to adopt plan design to help
employees save, they should also advocate to help the HCEs.
When discussing retirement readiness with a sponsor
client, advisers should first maximize what participants and
sponsors can save in their qualified plan. " This benefits all, "
he says. " Creditors have no access to qualified plan assets,
as they do to nonqualified plan assets, and employers get a
current tax deduction on their contributions.
Qualified Retirement Plan Options
Plan sponsors can choose from several options, without the
sponsor or the HCE needing to leave the safety of a qualified
plan. With all of them, though, contributions remain
subject to statutory limits, which HCEs may not save above,
Penland notes. In addition, the options all require that the
sponsor invest more money in the plan.
One option for employers is to use a permitted disparity
formula to calculate employer profit-sharing contributions.
Permitted disparity allows plan sponsors to allocate contributions
by applying one percentage on employee salaries up
to the Social Security taxable wage base (TWB)-$132,900
this year-and another on employee salaries above the
TWB. This results in a higher contribution to HCEs.
Another option is a new comparability, or cross-tested,
plan design. Here, participants are divided into groups,
with each group receiving its own level of employer contributions.
For example, says Tom Foster, national spokes46
| planadviser.com March-April 2019
Art by Wenting Li

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PLANADVISER - March/April 2019

Table of Contents for the Digital Edition of PLANADVISER - March/April 2019

2019 PLANSPONSOR Retirement Plan Advisers of the Year
Coaching the Committee
When Savers Exceed the Limit
The Role of Alternatives
Buyer Beware!
Are Personal Advisers ERISA Fiduciaries
Unrelated Taxable Income and Pensions
An IPS Is Not Required
PLANADVISER - March/April 2019 - C1
PLANADVISER - March/April 2019 - FC1
PLANADVISER - March/April 2019 - FC2
PLANADVISER - March/April 2019 - C2
PLANADVISER - March/April 2019 - 1
PLANADVISER - March/April 2019 - 2
PLANADVISER - March/April 2019 - 3
PLANADVISER - March/April 2019 - 4
PLANADVISER - March/April 2019 - 5
PLANADVISER - March/April 2019 - 6
PLANADVISER - March/April 2019 - 7
PLANADVISER - March/April 2019 - 8
PLANADVISER - March/April 2019 - 9
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PLANADVISER - March/April 2019 - 11
PLANADVISER - March/April 2019 - 12
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PLANADVISER - March/April 2019 - 14
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PLANADVISER - March/April 2019 - 18
PLANADVISER - March/April 2019 - 19
PLANADVISER - March/April 2019 - 20
PLANADVISER - March/April 2019 - 21
PLANADVISER - March/April 2019 - 2019 PLANSPONSOR Retirement Plan Advisers of the Year
PLANADVISER - March/April 2019 - 23
PLANADVISER - March/April 2019 - 24
PLANADVISER - March/April 2019 - 25
PLANADVISER - March/April 2019 - 26
PLANADVISER - March/April 2019 - 27
PLANADVISER - March/April 2019 - 28
PLANADVISER - March/April 2019 - 29
PLANADVISER - March/April 2019 - 30
PLANADVISER - March/April 2019 - 31
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PLANADVISER - March/April 2019 - 33
PLANADVISER - March/April 2019 - 34
PLANADVISER - March/April 2019 - 35
PLANADVISER - March/April 2019 - 36
PLANADVISER - March/April 2019 - 37
PLANADVISER - March/April 2019 - 38
PLANADVISER - March/April 2019 - 39
PLANADVISER - March/April 2019 - 40
PLANADVISER - March/April 2019 - 41
PLANADVISER - March/April 2019 - Coaching the Committee
PLANADVISER - March/April 2019 - 43
PLANADVISER - March/April 2019 - 44
PLANADVISER - March/April 2019 - 45
PLANADVISER - March/April 2019 - When Savers Exceed the Limit
PLANADVISER - March/April 2019 - 47
PLANADVISER - March/April 2019 - 48
PLANADVISER - March/April 2019 - 49
PLANADVISER - March/April 2019 - The Role of Alternatives
PLANADVISER - March/April 2019 - 51
PLANADVISER - March/April 2019 - Buyer Beware!
PLANADVISER - March/April 2019 - 53
PLANADVISER - March/April 2019 - Are Personal Advisers ERISA Fiduciaries
PLANADVISER - March/April 2019 - Unrelated Taxable Income and Pensions
PLANADVISER - March/April 2019 - An IPS Is Not Required
PLANADVISER - March/April 2019 - C3
PLANADVISER - March/April 2019 - C4
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