Are You Getting the Best Out of Your 401k Plan?

When it comes to your future retirement, it is best to have your ducks in a row when the time comes to bask in the land of post-occupational bliss.

As any keen investor knows, it's best to prepare and plan. And thanks to the Internal Revenue Service, a handy checklist has been created to make sure you know exactly what you can expect from your 401(k).

The IRS surveyed a sample of the 500,000 401(k) retirement plans covering 60 million Americans and brought to light features that employees can anticipate and demand of their plans from their employers...

Policies like after-tax contributions, employer matching, and vesting among others that can have a significant impact on your potential retirement plan.

The Interim Report has been released, though a much more detailed report is due out by the end of the year. The questionnaire covered 1,200 plans (plans that did not respond to the survey were audited).

Employers, pay attention! You can use this list as the point of reference in deciding whether you should amend your plan to add new features or enhance benefits policies.

For employees, this list may prove helpful in gathering support for what you'd like to add to your plan.

Here are a few statistics before digging deep into the key features...

One feature that might have employees more interested if offered more broadly is allowing employee after-tax contributions, which are separate from a Roth option. Only 4% of the plans the IRS surveyed allowed these after-tax contributions. The survey discovered 67% of employees who were making after-tax contributions increased the dollar amount of those contributions between 2006 and 2008, meaning this feature is incredibly valuable for particular employees.

Another popular feature that might be missing from your employer's plan is a Roth option. Only 22% of 401(k) plans surveyed offer a Roth option, while 65% of employers whose plans don't offer a Roth option cite the reason as a lack of interest from employees.

As Forbes explains:

Yet Roth savings can be very powerful as the earnings and eventual distributions are tax-free, leaving retirees with a tax-free bucket to draw on when managing their retirement income and retirement tax bracket. For 2012, employees can contribute $17,000 a year to a 401(k) account, or $22,500 if they are 50 or older.

As for the list of various other features that could be added to your 401(k) plan and the respected percentages of plans surveyed with that feature:

• No age requirement to sign up (20%)
• Employees can change deferral elections at any time (41%)
• Permit after-tax contributions (4%)
• Catch-up contributions allowed for employees at age 50 (96%)
• No service requirement (minimum time on the job) needed to make contributions (13%)
• Employer matching contributions program in place (68%)
• Hardship distributions permitted (76%)
• Employee loans permitted (65%)

Now that you have your list and an idea of what other employers are doing, speak with your employer about adding various features you'd find beneficial to your plan.

If you're an employer, talk with your plan holders on what they might be interested in. You might be surprised what your employees are interested in and how much reforming a retirement plan can add to quality of life at work...