Alternatives to 401(k) plan


Consider some low-risk retirement benefit options to offer employees instead of a 401(k) plan.

Q: What are some low-risk retirement benefit options I can offer my employees instead of a 401(k) plan?

A: In the financial world there are many forms of risk, and this question sounds like it may stem from the losses that occurred in 2008. Risk is the likelihood of not achieving a particular goal, such as accumulating enough for retirement. So, assuming "low-risk" means an option with which the employee's retirement benefit is more predictable, the current plan sponsor should offer a defined benefit plan (which most know as a pension plan). Even though the plan assets are still exposed to market forces, a defined benefit plan is a lower risk option because financial professionals (not the employee) select and manage the investments. Unfortunately, these plans do place more administrative burdens on employers due to the actuarial work required to ensure the plan's funding need is met and benefits are correctly calculated.

The next best alternative for the 401(k) sponsor to lower the risk to the employee is to focus on the support the custodian provides them. As an example, instead of the custodian only providing a list of investment choices, have them provide asset allocation models using their investments.

Answer provided by Bonnie Hauck Evelyn, CBIZ Employee Services, Boca Raton, Florida. Send your practice management questions to

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