In order to avoid fiduciary liability, you, as a fiduciary, should pay attention to the expenses of the 401k plan you provide, and its performance, therefore:
- If the funds provided in your 401k plan have unreasonably high expense ratio, or advisor services are too expensive, then probably you should investigate more to find out if there’re any similar funds that are cheaper, and monitor average advisor fee in your area
- If the funds in your 401k plan show poor performance for the past years, you should try to find alternatives with better history, in order to improve the performance rating, and avoid the risk of possible liability”.
- If you use provider’s target date funds without investigating, whether they are the best in their class.
- If you use multiple Recordkeepers and Providers. Even if you had them in your plan or plans for years, this does not mean that you should keep them forever. It is just that several parties doing the same thing for your plan might have their services overlap and in general result in inefficiency and more cost to participants.
- Does the plan provide a menu that allows participants to create a diversified portfolio to mitigate any substantial loss? Are there enough low risk investments available to participants? If not, then that can mean plan sponsors might not be able to claim 404c safe harbor from liability. Learn How to Become an Expert on 404c Safe Harbor For Your Plan Sponsor Clients
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