Retirement plans such as 401(k) plans have costs associated to run and maintain, but are you getting everything you need? The old saying, “You get what you pay for” applies when paying for your services. The Plan Sponsor and committee have a responsibility to understand what these fees are and to benchmark them periodically. Sounds easy, right? Well, what about your investment menu?
The investment menu is one of the biggest decisions you will make in your plan, and picking the cheapest option isn’t necessarily the best option. ERISA guidelines are not about 20/20 hindsight, they are about the fact that careful consideration was shown to benefit the participant. You may come across a recordkeeper that has a list of investment funds that have been pre-screened to choose from.
You may entrust your advisor to create a menu from this list, however, the liability and compliance of the menu still falls on your shoulders. A common misconception is that the pre-screened menus came from a fiduciary or continue to provide fiduciary services to the menu. Unfortunately, this isn’t always the case. Whoever pre-screened the menu options are not responsible for the funds selected in your plan and they are not responsible for developing the process for monitoring and replacing.
This is why you should always hire a fiduciary investment manager to maintain the menu from top to bottom. When you hire FiduciaryShield, they make sure the service providers are doing their job, and more importantly, that the investment manager is doing theirs.
Another item FiduciaryShield address is fees paid for services. There have been lawsuits after lawsuits in regards to excessive fees in 401(k) plans. Most lawsuits have been centered on larger plans, but recently, a plan of a much smaller size found itself in trouble with litigation. Understandably, there are always cost to run a 401(k) plan, but hidden fees are where the trouble begins. Some costs are very transparent, while others are buried in the investment menu and difficult to understand. It is up to the Plan Sponsor and their committee to understand all costs (even the ones that are hard to find in the fee statement) and determine if they are reasonable.
Having a prudent and loyal process when selecting the right service provider and investment menu can be difficult. We will make it easy for you with a FiduciaryShield 401(k). We specialize in management, administration, and compliance of 401(k) plans. Contact us today and we’ll make sure your fees are reasonable, and your plan is safe.