Therefore, it isn't too difficult to pass the coverage test if all employers in the controlled group offer the plan. So, if many eligible non-highly compensated employees don't contribute, the highly compensated contributions will be curtailed. Offering a higher company match usually helps but is expensive. The lower contribution averages previously mentioned result because eligible employees who are non-contributors must be counted as participants for IRS test purposes. This extra communication is less costly than increasing the match.
Employees are more willing to contribute if they have access to their funds through loans.
At the same time, permitting too many loans may cause employees to stop saving if they become over-burdened by loan repayments. Setting the maximum employee deferral percentage at the highest legal limit for non-highly compensated employees rather than imposing a lower uniform percentage for all employees. To assure that the employer is not liable for the employees' investment choices, it is important to offer a range of investment options from low risk to higher risk. For example, a money market fund, a GIC fund, a stock fund and a balanced fund of stocks and bonds. Employer stock also can be an investment choice but should be offered along with at least three other options.