Key Points:
- Eligibility: Join after three months of employment.
- Contributions: Up to 50% of salary; employer matching available.
- Vesting: Immediate for all contributions.
- Investment: Very good variety of options, including low-cost Vanguard funds.
- Post-Employment: Stay in the plan but pay your own admin fees due to impressive fund selection.
Introduction
The RPM International Inc 401(k) plan, like most of its benefits, is really top-notch within the corporate world. With a variety of investment options, including some exclusive low-cost Vanguard mutual funds, this 401(k) plan is designed to help you achieve your long-term financial goals. In this blog post, we’ll dive into the key features, benefits, and tips for making the most of your RPM International Inc. 401(k) plan.
Key Features
Eligibility
Employees are eligible to participate in the plan after they have worked for the company for a period of 3 months.
Contributions
Participants can contribute up to 50% of their gross annual compensation. If you are 50 years old or older, you can also make catch-up contributions. The company also offers matching contributions, which vary depending on the collective bargaining agreement of each participating union.
Vesting
Vesting is immediate for both employee and employer contributions, meaning you own 100% of the contributions and their earnings as soon as they are made.
Loans and Withdrawals
Participants can borrow from their fund accounts, and in-service withdrawals are available in certain limited circumstances.
Employer Matching
Employees can contribute up to 50% of their gross annual compensation. The company matches contributions depending on the collective bargaining agreement of each participating union, up to a maximum rate of 100% of the first 3% and 50% of the next 2% of employee deferrals.
The matching contribution rates at RPM aren’t arbitrary; they meet the criteria for IRS “safe harbor” 401(k) plans. This qualification allows RPM to bypass certain tests and audits, thereby saving the company (and you) money.
The amounts are not the highest compared to top employers, but you must remember the plan is gravy on top of RPM’s pension program (discussed on page 25 of the most recent 10-K).
Important Tip About Matching
It’s important to know that RPM provides matching contributions on a per-pay-period basis. If you contribute the maximum amount to your 401(k) too early in the year, you’ll lose the opportunity for employer matching for the remaining pay periods. To maximize RPM’s matching contributions, it’s best to make your 401(k) contributions evenly throughout the year.
Investment Options
The investment options are where the RPM plan really shines; it offers a variety of investment options, including mutual funds and company common stock. Participants can invest up to 20% per contribution in the company’s common stock – which, if you are an employee, I know you have heard how it has beaten the S&P500 as an investment. Still, I would be careful you don’t end up in a situation with high levels of concentration risk.
Non-RPM Stock Exclusive Investment Options
RPM is an outlier in a world where so many employers allow crap funds to be in their 401Ks because the administrator will lower fees charged to the employer. The RPM International Inc. 401(k) plan has an incredible selection of low-cost Vanguard mutual funds that would require a minimum transaction of $5 million for you to buy on your own. Here are a few of those exclusive funds:
- VINIX (Vanguard Institutional Index) – Exp 0.04%
- VMCIX (Vanguard Mid-Cap Index Institutional) – Exp 0.04%
- VSCIX (Vanguard Small-Cap Index Institutional) – Exp 0.04%
- VTSNX (Vanguard Total International Stock Index) – Exp 0.08%
For context, the next tier down from the Vanguard Mid-Cap Index Institutional fund is the Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX) with a $3,000 minimum purchase amount (quite a drop from $5M) and an expense ratio of 0.05%. That doesn’t sound like much, but it’s 25% more and can add up.
In fact, even if you are an ex-employee, it only takes a $410,000 balance invested in VMCIX to save more by staying in the RPM 401K and paying the admin fee rather than moving the investments to another 401K or IRA. Ask me how I know….
Separation
If you leave the company, you can still stay in the plan, but RPM will stop covering the administrative fees. The fees for staying in the plan are quite affordable, however. In 2022, I only paid $41 for the whole year. To have access to such a fantastic investment selection it’s a bargain.
Yearly Review Reminder
The last tip I’ll leave you with applies to all 401(k)s: setting a yearly reminder to review your 401(k) plan can be a game-changer for your long-term financial health. This annual check-up is an opportunity to reassess your contributions, evaluate the performance of your chosen investments, and adjust your overall retirement strategy to align with your financial goals. By making it a habit to review your 401(k) at least once a year, you can proactively manage your retirement savings and take full advantage of the benefits offered by the RPM International Inc. 401(k) plan.
Conclusion
The RPM International Inc. 401(k) plan offers a robust set of features designed to help you build a secure financial future. With immediate vesting, a variety of investment options, and the opportunity for employer matching, this plan is a valuable asset for your retirement planning. Just remember to spread out your contributions throughout the year to take full advantage of the employer match.
If you have any questions about maximizing the value of this plan or any component of RPM compensation, such as deferred compensation, don’t hesitate to reach out to Purpose Built. We’re here to help you navigate your options and maximize your financial opportunities. Act now and secure your financial future today!
Disclaimer: I am not associated with, or receive, any compensation from RPM Inc. The information provided in this blog post is for informational purposes only and should not be considered financial advice. Consult with a financial advisor for personalized advice tailored to your individual needs and verify any information with your HR representative, as plan guidelines are constantly changing.
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