If your performance plan for this year shows that you need to review your 401(k) plan fees and/or providers, now is the time to get started. Most plan sponsors who decide to make changes like to have those new features in place by Jan. 1 of the new plan year.
What should you review?
- Fees. Every aspect of 401(k) plan administration and consulting is under intense fee pressure. If you haven't reviewed your vendor within the past three to five years (as the Department of Labor recommends) you will be surprised at the changes. Fees have come down and 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. Expect to have a more robust 401(k) plan for your participants after you finish your review.
- Funds. Use this provider review to evaluate your fund line-up. Make sure that you offer a professionally managed investment option, like target-date funds. Talk to prospective investment advisers about bolstering the conservative options in your plan. Interest rates are about to start 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?
- Fiduciaries. Make sure that the investment adviser you work with has signed on to your plan as a fiduciary. It is uncommon nowadays for plan sponsors to work with investment advisers who are not fiduciaries. 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. There is no reason to give your business to someone you don't truly enjoy working with and who makes things easy for you to understand.
Time is running out. Generally, all provider changes need to be finalized by Oct. 31 in order to have a Jan. 1, 2015 effective date.
Robert C. Lawton is president of Lawton Retirement Plan Consultants, LLC (lawtonrpc.com), an RIA firm helping retirement plan sponsors with their investment, fiduciary, employee education and compliance responsibilities. He may be contacted at email@example.com or 414.828.4015.
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