Is Your Company’s 401(k) Plan as Good as It Could Be?
Two recent court rulings may make you want to double-check.5/28/2019
investment planning
How often do retirement plan sponsors check up on 401(k)s? Not as often as they should, perhaps. Employers need to be especially vigilant these days.
Do you have high-quality investment choices in your plan? While larger plan sponsors have more “pull” with plan providers, this does not relegate a small company sponsoring a 401(k) to a substandard investment selection. Employees are smart and will ask questions sooner or later. “Why does this 401(k) have only one bond fund?” “Where are the target-date funds?” “I went to Morningstar, and some of these funds have so-so ratings.” Questions and comments like these are reasonable and surface when a plan’s roster of investments is too short.
Are your plan’s investment fees reasonable? Employees can deduce this without checking up on the Form 5500 you file – there are websites that offer some general information as to what is and what is not acceptable. Most retirement savers read up on this with time, and most know (or will know) that a plan with administrative fees pushing 1% is less than ideal.
Are you using institutional share classes in your 401(k)? This was the key issue brought to light by the plan participants in Tibble v. Edison International. The U.S. District Court noted that while Edison International’s investment committee and third-party advisors placed 17 funds in its retirement plan, it “selected the retail shares instead of the institutional shares, or failed to switch to institutional share classes once one became available.”3
Institutional share classes commonly have lower fees than retail share classes. To some observers, the difference in fees may seem trivial – but the impact on retirement savings over time may be significant.3
When was the last time you reviewed your 401(k) fund selection & share class? Was it a few years ago? Has it been longer than that? Why not review this today? Call in a financial professional to help you review your plan’s investment offering and investment fees.
Need help planning your retirement? Have you saved enough to live your desired lifestyle in retirement?
Call Now Request Consultation (COMPLIMENTARY, NO-OBLIGATION, INITIAL CONSULTATION)