5 Characteristics of a Great 401(k) Plan

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The next generation retirement plan must include managed portfolios only. Giving participants too many choices creates confusion and anxiety. We must offer plan which are more ‘pension fund’ like.

The plan hired an Investment Fiduciary. Some companies are aware that the DOL requires that they hire an expert if they do not have the expertise. Most others have no idea of this requirement. The best plans know and the plan and the participants are best protected by the fiduciary standardrather then the suitability standard of broker dealers and insurance companies.There are two types of investment fiduciary. The first is a 3(38) “investment manager” who makes the investment decisions for the plan and is best suited to the employer who understands that neither they nor even an investment committee have the time or expertise to make prudent independent investment decision for the plan.

The second type of fiduciary is referred to as a 3(21) and provides “independent objective advice” to the investment committee who makes the final decision as to investment selection and monitoring.

In either case the investment fiduciary keeps the plan and the participants interests foremost at all times which is not the case with a representative of an insurance company (such as John Hancock, ING, Principal or Transamerica) or an investment services company (such as Fidelity, T. Rowe Price, Franklin Templeton, UBS or Black Rock)

The goal of your company 401(k) plan is to provide a retirement income for yourself and your employees. Many service providers, while not deceptive, leave out enough of the truth to make the sale. For instance, a feature called ‘fiduciary warranty’ sounds good, however it provides no protection to you.

Please comment or call to discuss how this can help your company.

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