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The 7 Most Critical Action Steps 401k Fiduciaries Must Address Right Now

August 15
19:52 2009

Are you a 401k fiduciary looking for ways to reduce your personal fiduciary liability? The United States Department of Labor (DOL) doesn’t expect the Employee Retirement Income Security Act (ERISA) fiduciary to always produce favorable outcomes for retirement plan beneficiaries. Rather, the DOL expects the 401k fiduciary to carefully document and prudently execute all aspects of the retirement plan.

In this spirit of prudent due diligence, we offer the following seven critical action steps:

  • Conduct a preliminary plan fiduciary diagnostic and review to check for any fundamental compliance exposures.
  • Identify, document and understand the true cost of plan services and the costs borne by the employer, plan, and participant. Benchmark plan costs against fellow employers in comparable peer groups.
  • Secure improved financial disclosure from plan service providers, including potential conflicts-of-interest.
  • Create, implement and maintain an Investment Policy Statement that is consistent with compliance standards.
  • Create, implement and maintain an Investment Due Diligence process that is consistent with compliance standards.
  • Create, implement and maintain a employee and trustee education framework that is consistent with compliance standards
  • Keep track of recent news on compliance issues and continually monitor plan investment options.

Does the 401k plan fiduciary need to conduct this diagnostic test alone? Definitely not! There are plenty of independent fiduciary consultants – lawyers, accountants and registered investment advisers – capable of undertaking a thorough and comprehensive test on your behalf. The key attribute here, however, (and aside from relevant experience), is “independent.” An existing service provider likely isn’t the ideal candidate when it comes to an independent fiduciary review.

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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