4 Steps To Determine If 401k Is Broken

By: Jessica Maldonado

4 Questions to Help Determine: Is My 401(k) Plan Broken?

Most plan sponsors really don't know when their plan is broken and they don't know the questions to ask to find out. Plan Sponsors: Ask yourself the four questions below. If you can't answer the questions or find your answers aren't satisfactory, you may be promoting a broken 401(k) plan to your employees.


1. Are you making proper investment choices available to participants?
Start by developing a risk checklist for plan participants. Each participant will make different choices based upon their investment needs and the investment selections you make available to them. Poor investment options can set them up for failure. If the plan sponsor is not properly managing the plan, not selecting appropriate investment choices for participants use or not putting the best interests of participants ahead of their own, they are not meeting their responsibilities.


2. Do you have a benchmark for investments, fees and services?
The full spectrum of plan performance and investments, total costs for management and services provided by your third party vendor are all areas to check against industry benchmarks.


3. Do you suffer from excessive fees?
Excessive fees can eat away at a 401(k) plan. The Employee Retirement Income Security Act states that you must account for all fees paid by the plan. This includes performing due diligence on all aspects of the administration of your plan and a review of the service provided for fees paid.


4. Are you addressing the eight key issues required of a successful plan?

  1. Documenting Plan Goals and Objectives
  2. Developing a Statement of Investment Policy
  3. Monitoring Plan Assets
  4. Documenting Fiduciary Standards of Care
  5. Selecting and Monitoring Service Providers
  6. Understanding Plan Expenses
  7. Understanding Participant Communication Guidelines
  8. Staying Informed of Changes That Affect Your Plan

Many plan sponsors are exhausted with the complexity of their 401(k) plans. They may be meeting the minimum legal standards, especially if they have delegated this responsibility to a third-party administrator (TPA); but, they may not be meeting the published fiduciary standards. So, ask yourself this question: "Is my plan broken?" If you're not sure, maybe it's time for a check-up!


The published fiduciary standards along with a self-assessment questionnaire are available at www.fi360.com.


Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.

The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.

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