Top Two Tasks for 401K Plan Fiduciaries
(The short as I could make it version)
As a New Jersey Business Owner with a 401K Plan, the top two ways you can demonstrate that you acted in the “Best Interest” of the participants is to retain the documents you used to make the decisions you made and why you made them. A benchmark report can fulfill one part of that requirement. The business world has changed so much in the past year, and most of that change is in your favor.
When was the last time the plan received a benchmark report on its investments and plan fees? If it has been more than a year or two (or more), this year is a great time to get one.
Task #1: Benchmark the plan’s investments and fees.
The benchmark report compares your plan’s costs and investment performance to others in the marketplace. The financial industry is seeing a reduction in fees at all levels, so it’s essential to have a current benchmarking report created.
Task #2: Document the findings of the benchmark report.
You’ll need to “show that plan costs are reasonable,” per ERISA, and that the participants are getting the best service for the cost. The cheapest is not always the best. Make sure you have a report that can be used as documentation of your decision. But it does not end there. You’ll have to explain “why” you made those decisions for your company’s plan.
Hopefully, you and your plan advisor have fulfilled this 401K fiduciary responsibility. If not, I would strongly advise you to consider having your company’s plan fees and investments benchmarked this year.
Consider asking your retirement plan advisor about your 401K fiduciary responsivities if you are in doubt. A Fiduciary Checklist is another good way to document your actions as a fiduciary.
As always, seek the advice of your financial professionals before implementing any method on your own.
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