Begin working on 2018 401(k) plan changes now
If you intend to review your 401(k) plan fees and/or providers this year, now is the time to get started. Most plan sponsors who decide to make retirement plan changes like to have those new features in place by Jan. 1 of the new plan year. That means time is running out — generally to preserve that date, provider changes need to be finalized by Oct. 31.
Here are a few things to consider:
Fees. Every aspect of 401(k) plan administration and consulting is under intense fee pressure. If you haven’t reviewed your provider fees within the last three to five years (as the Department of Labor recommends), you will be surprised at the changes. Fees have come down, so it is reasonable to expect a fee reduction for each piece of business you evaluate.
Features. The 401(k) plan market is hyper-competitive. Investment advisers, trustees, custodians, recordkeepers and consultants are constantly adding new features to better serve their clients. Make sure you at least consider the following features for your 401(k) plan:
· Roth 401(k) contributions
· A Roth in-plan conversion option
· Financial wellness education
· More than one participant investment advice option
· Mutual fund share classes that have no revenue sharing
· ESG investment options
Funds. During your review process, take time to evaluate your fund line-up. Make sure that you offer a balanced investment option, like target date funds. Talk to your investment adviser about bolstering the conservative options in your plan. Interest rates will continue rising — will your fixed-income options perform well in a rising interest rate environment?
Correlations are finally starting to diverge. Do you offer the right actively managed funds to take advantage of a more normalized investment environment? It is clear millennials look at ESG criteria when investing. Does your plan provide ESG information and investment options?
Fiduciaries. Make sure that the investment adviser you work with has signed on to your plan as a fiduciary. It’s uncommon nowadays for plan sponsors to work with investment advisers who are not fiduciaries.
Many investment advisers who work for brokerage firms, banks and insurance companies are unable to sign on to 401(k) plans without limitations. If you work with an adviser from one of these organizations, find out what the limitations are.
If you wish to work with an investment adviser who will sign on to your 401(k) plan without fiduciary limitations, hire an adviser employed by a Registered Investment Advisory (RIA) firm. If your investment adviser can’t or won’t act as a fiduciary, find another one.
Fun. Work with providers that are right for your culture. You have a tremendous amount of choice in the 401(k) world. Your providers should make your 401(k) plan easier for you to understand and be fun to work with.