Five 401(k) Plan Essentials for Plan Sponsors and Trustees

Five 401(k) Plan Essentials for Plan Sponsors and Trustees

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Author: Jeremy K. Kuhlen, CFP®, CRPS®, AIF®
Director – Private Client Practice |
CapGroup Advisors, LLC

1.     Partner with a Fiduciary Advisor
Brokers, insurance reps, and mutual fund salespersons have many potential conflicts when it comes to the 401(k) marketplace. Trustees of 401(k) plans should seek out an independent advisor who:

i.    Receives no compensation from the specific investments offered in a plan  
ii.    Accepts fiduciary responsibility in writing
iii.    Provides a prudent process to ensure the trustee’s fiduciary duties are met

2.     Provide Prudent Portfolios
The majority of plan participants lack the expertise to design a diversified portfolio with the appropriate risk and return characteristics from the many investment options typically offered in a 401(k) plan. When confronted with too many investment options, many participants suffer from over-analysis or will simply avoid investing because of the complexity of choices.  Professionally managed portfolios can take the guesswork out of building a diversified portfolio for plan participants and improve the odds of a more successful outcome.

3.     Partner with an ERISA 3(38) Fiduciary
Many trustees do not realize they are responsible for the selection and monitoring of the fund line-up in their existing 401(k) plan. By working with an ERISA 3(38) fiduciary, plan trustees enact a “safe harbor”, transfering the work and liability associated with selection, monitoring and replacement of a plan’s investments to a professional investment manager. Perhaps most importantly, the 3(38) fiduciary is legally obligated to act in the best interests of the plan.

4.     Optimize Plan Design
With plan design, one size does not fit all. The demographics of a company along with its goals and objectives should all be taken into consideration in designing a plan. As time goes by, the company situation may change, new regulations may be implemented and the 401(k) plan should evolve as well. Working with a fiduciary advisor and third party administrator to continually optimize plan design is another essential area often overlooked by plan trustees.

5.     Provide Fee Transparency
A fundamental responsibility of plan trustees is that plan assets must be used ONLY for the benefit of plan participants or for “defraying reasonable expenses of administering the plan”. Investment expenses, including fund expense ratios, investment advisory fees, 12b-1 fees and the like are the largest component of 401(k) plan fees and expenses. Over the past few years, increased litigation and the U.S. Department of Labor’s stepped-up focus on plan sponsors’ duty to monitor 401(k) plan expenses has shown that a plan sponsor’s failure to fully understand plan expenses can be costly. Fee disclosure is a starting point, but understanding reasonableness has been difficult for most trustees and participants who lack context. A fiduciary advisor can assist in determining a plan’s expenses, benchmarking them against other plans and explaining the components to trustees and participants.


For a deeper look into your company retirement plan through an objective lens, contact your Keiter team to schedule a review of your plan’s fiduciary practices.
  Contact 804.747.0000 | .

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.


About the Author

Keiter CPAs is a certified public accounting firm serving the audittax, accounting and consulting needs of businesses and their owners located in Richmond and across Virginia. We focus on serving emerging growth businesses and companies in the financial servicesconstructionreal estatemanufacturingretail & distribution industries and nonprofits. We also provide business valuations and forensic accounting servicesfamily office services, and inbound international services.

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