It is safe to say that we now live in the “fiduciary era” when talking about company 401(k) retirement plans. If you are a business owner who sponsors a 401(k) plan, you have the fiduciary responsibility for all aspects of your retirement plan. Plan sponsors have seen an increase in lawsuits for a variety of reasons, but recently the focus has been on the following three areas: excessive fees, poorly performing funds, and lack of looking out for participants’ best interest.

A study conducted by Boston College had this central conclusion: “From the courts’ perspective, fiduciaries’ main responsibility is to follow a prudent process in making plan-related decisions.”

Part of this prudent process is having a periodic review of your company’s plan. When is the last time you sat down and reviewed your 401(k) plan? If you are the fiduciary of your company’s 401(k) plan, it is important to understand what your plan has to offer and how it compares to other plans in the marketplace.

401(k) Retirement Plan Review: Key Items to Consider

As the fiduciary of the plan, here are the key items to review:

1. Plan costs, including advisory fees, costs of the funds within the plan, and administrative fees
   • Do you know the cost of the funds, the administrative cost, and the advisory cost of your plan?
   • How do these costs compare to other plans available?
   • Are your costs in line with what is in the best interest of your employees?
2. Investment offerings and performance
   • What investments do you offer within your 401(k) plan?
   • Do you offer mutual funds, exchange-traded funds or other low-cost investment options for your participants?
   • You should know how the funds within the plan rate against their benchmarks to assess if they are performing well for the cost of the investment option.
3. Availability of professionally managed models based on a participant’s risk tolerance and/or anticipated retirement date
   • Many participants in 401(k) plans are overwhelmed by all the choices within the plan.
   • Does your plan offer easy to use asset allocation models or target retirement date funds?
   • Plan vendors will often provide a risk-tolerance questionnaire to be completed by participants to direct them into one of the asset allocation models based on their risk assessment. Does your plan offer this?
4. Annual education for participants
   • Education for participants is an essential part of complying with your responsibilities as the plan fiduciary.
   • Is someone providing annual education to your participants?
   • Provide an opportunity for your participants to receive enough information to make informed investment decisions.
5. Delivery of annual disclosures and participant notifications by required due dates
   • Are you providing the necessary annual disclosures to your plan participants?
   • Do you know what disclosures are necessary for new employees?
   • Do you know what disclosures are necessary for terminated or retired employees?

These five items are just some of the areas to review when looking at your plan. The Journal of Accountancy recently published a quiz you can take as the plan sponsor to correctly benchmark your plan against others and see where you stand. Check out the full quiz using this link: https://www.journalofaccountancy.com/issues/2018/oct/401k-plan-features.html.

Let Us Give a Complimentary Review of Your Plan to See Where You Stand

Offering a retirement plan can be one of the most rewarding yet challenging decisions an employer can make. Administering the plan and acting as the fiduciary to the plan, however, requires certain actions and involves specific responsibilities. The biggest area to come under intense focus recently is cost. Most lawsuits relate to this specific item. If you want a complimentary review of your retirement plan’s costs, contact DHJJ Financial. Our DHJJ Financial Advisors team will conduct a full review of fund offerings and costs associated with your plan and help you understand how this compares to other plans available in the marketplace.

If you would like a complimentary review, contact us at 630-420-1360 or fill out the form below.