Before widespread use, 401k AI personalization needs careful management of fairness, transparency, and fiduciary duty. And when you read “plan sponsors must,” you’re really reading “plan sponsors’ service providers must.”
Due Diligence
Here’s where the real disconnect kicks in: participants and pros don’t speak the same language on risk. Participants “feel” it. Meanwhile, advisers whip out rulers like standard deviation or some index, measuring volatility in neat little boxes.
Viewing this content requires a Basic (Free) Membership or better. You are not currently logged in. If you have an account, you may login below, or use the “Log In”
The central role of the recordkeeper can create reverberations with other providers should the plan sponsor attempt to change recordkeepers. Any hiccup in the employees’ ability to manage their retirement assets can cause problems for plan sponsors.
If plan sponsors are working with the appropriate plan fiduciary, then an ongoing review of the fund’s performance, fees, and underlying risk should be part of their ongoing process
Herein lies the potential for a direct conflict of interest. This applies generally to all proxy voting in commingled portfolios.
Since actively managed funds have lagged index funds, does this case put their continued use in ERISA plans at risk?
On the face of it, American Airlines seemed to follow its documented process. So, what did the company do wrong?
Plan sponsors need to think about it in these terms: Does it make sense to have a pork-belly ETF on a 401k investment menu? How about orange futures?
CITs can only be offered within the confines of a trust relationship. That means the plan itself might be structurally different than one that has an investment menu limited to mutual funds.
