It’s too easy for plan sponsors to get lost in the weeds when dealing with plan minutia. Yes, “the buck stops here” reality can overwhelm many. Delegation is the key. It’s also the Achilles Heel. This is where the magic word emerges.
Tag "401k"
“Industry participants also argue that the rule transforms one-off transactions into fiduciary relationships in violation of the common law, but the common law of the states is divided on this, and there is a need for a federal standard regulating investment advice fiduciaries.”
Plan sponsors ought naturally to know how the plan addresses the needs of their business, but do they really know how to tweak the plan to improve outcomes?
This isn’t a compliance audit, it’s an operating efficiency audit. That covers plenty of ground, from technology to benchmarking the value offered by the service provider.
Oddly, it’s usually the opposite for mutual funds. Actively managed (higher operating cost) funds tend to perform better during market downturns. Passive (lower operating cost) funds, on the other hand, generally perform better during growth markets.
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
For all the rose-colored eyes that have a created a legend flawless certitude concerning memories of a time that never existed, pension plans simply can’t measure up to 401k plans.
Herein lies the potential for a direct conflict of interest. This applies generally to all proxy voting in commingled portfolios.
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?
The Irony Of Taxing 401k Plans To Save Social Security
Worse, if the “alternatives” alluded to by the paper entail government backed programs like Social Security, this could have a debilitating impact on encouraging people to be responsible for funding their own retirement.