12/3/13 5:26 PM – 401(k) YEAR-END FIDUCIARY REVIEW

The year is almost over. If you are a business owner or high-level executive, have you reviewed the following on your qualified retirement plan this year?

1. Investment Policy Statement – It is the 1st document you will be asked for in a lawsuit or government audit. It is not the plan document or summary plan description (SPD); it is the document written by the plan fiduciaries (usually H.R. and senior management) setting forth the criteria for the a) selection, b) monitoring and c) replacement of plan investment options and the advisor. It forms the basis for managing your plan prudently and documenting that you did.

Ask your CFO or HR Dept. to give you a copy of the plan IPS. Hopefully, it is not simply boilerplate sitting on the shelf and you have used it for regular monitoring and documentation.

2. Plan Investment Advisor – Under ERISA, a qualified retirement plan investment advisor must be “properly appointed.” There should have been a documented prudent process for their selection, not just hiring a financial planner, stockbroker, insurance agent or banker. It is your responsibility to regularly monitor your advisor and document the reviews. He should have training specific to qualified retirement plans, preferably earning an AIF designation.

3. Plan Costs – According to the Dept. of Labor, plan fiduciaries must “ensure that fees paid to service providers and other expenses of the plan are reasonable in light of the level and quality of services provided.” As a fiduciary, it may be you paying back the difference times the number of years the advisor or administrator was overpaid.

Have you compared costs in the last 5 years? Why not? Need help uncovering all the fees in ridiculously voluminous disclosure documents? I can help.

4. Share Classes on Plan Investments – In Tibble v Edison International et al. the 9th Circuit Court of Appeals ordered plan fiduciaries, not just the advisor, to pay money to the plan because the plan had mutual fund share classes that were not the lowest cost class available. Ouch! Has your advisor talked to you about the available share classes in your plan’s mutual funds?

Has your advisor suggested plan improvements, benchmarked costs or helped you document your compliance? Has he improved plan participation and education? He earned a lot. What did he do?

Most investment advisors on retirement plans under $10 million frankly don’t have the training or knowledge necessary to properly advise your plan. Let me, an experienced AIF designee, talk over your plan with you and give you the help you need. There is no charge for the initial consultation.

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