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401(k) Plan Fall Housekeeping Matters To Consider Before 2024

401(k) Plans Financial Planning

Key Takeaways

  • If an employer or plan sponsor does not want to be personally liable for the retirement plan and its investment decisions, they should enlist the services of an independent expert/ retirement financial advisor
  • Investment performance/ monitoring is an ongoing and demanding responsibility that should not be taken lightly, especially in regards to the investment options offered by a retirement plan provider
  • An investment policy might be more of a hinderance than qualified guidance for investing novices- again it is best to enlist the services of a third-party fiduciary

There's spring cleaning, and then there is fall housekeeping; we all reign in our summer budgets, turn the clocks back, check the literal smoke detectors and metaphorical "smoke detectors", like annual filings or assessing automatic payments.

Nevin Adams is ahead of us all already, making sure every plan sponsor has their T's crossed and their I's dotted before the fun, or holiday season, starts.

Key takeaways for plan sponsors and employers alike:

1. Your fiduciary liability insurance is not the same as your fidelity bond, nor your corporate governance policies.

A Fidelity Bond is required of every ERISA qualified plan, which protects the plan and its participants from potential malfeasance on behalf of the fiduciary/ plan administrator, trustee of the plan; whoever's name is listed on the insurance plan is the insured party. Fiduciary liability insurance protects the plan's fiduciaries from claims of a breach of contract, and fiduciary responsibilities (i.e. personal liability insurance for their actions and any co-fiduciary actions). Because as a plan sponsor, or plan fiduciary, or plan administrator the individual is held personally responsible for the plan and its investment moves.

Should the individual that is named as the responsible party feel they do not have the ability or understanding to make these decisions, a financial advisor with experience in retirement plans should be consulted, and their services should be obtained. It is the safest option.

2. An investment policy is not required, but might come in handy for novices.

That said, it could also be a hinderance. Depending on the language used in the policy, it could be construed that the information is backed by a financial advisor, or seen as an absolute. Financial advice is subjective and must take into account more factors than people realize. It is important to be honest about your financial goals, and areas for improvement, when speaking with a trusted financial professional. They're here to help, let them.

3. Target-date funds have an expiration date, it is the plan fiduciary's responsibility to make sure those QDIAs are current, and performing adequately over time.

This is the responsibility of the 3(38) that is listed on the plan, if the plan does not have a 3(38) investment manager, once again, they should explore this option. Target date funds are the default retirement investment fund option, for the majority of retirement plans in the U.S. but might not be suitable for every participant in the plan. This is purely because age is a prominent factor in retirement investing and planning. A plan sponsor should look at the overall target date funds offered int he plan, and ensure that its participants are selecting the right options for their retirement goals. For example, a 55 year old nearing retirement in the next decade, should NOT be investing in a 2025 Target Date Fund.

And probably the most important question listed...

4. Are the members of your plan's investment committee capable of performing their duties and looking out for the interests of all of the plan's participants?... If not, "they shouldn’t be on the committee—for their own sake, and the sake of every other committee member."

AKA: the reason our partners Fi401k Advisors, LLC exists:

Many employers and plan sponsors do not realize that if they are the responsible party, the plan's listed fiduciary (plan administrator), they must keep the plan in compliance, abstain from prohibited practices, and be able to make informed decisions in a timely manner in regards to the assets of the plan. Most of all, they are the sole liable party if they do not enlist the help of an RIA, or third-party fiduciary.

If an employer or designated plan administrator does not have a deep and reputable understanding of ERISA and general retirement investment protocols, and/ or lack the necessary technical knowledge to properly perform these duties, they are required, “to obtain the advice of a qualified, independent expert.” - See DOL Regulation §2509.95‐1(c)(6) -

Employers, HR executives, and general managers have enough on their plates as is, relieving themselves of investment liability should not be seen as a luxury, but more of a necessity once the business reaches a certain threshold.

A great piece out of, National Association of Plan Advisors, per usual. Read the full piece here:

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