Managing Fiduciary Responsibility in Your 401(k) Plan

Managing Fiduciary Responsibility

A 401(k) plan is a popular employer-sponsored retirement plan option. However, with the benefits of a 401(k) plan comes fiduciary responsibility. As a plan sponsor, you have a fiduciary duty to ensure that the 401(k) 's direction is in the plan participant's best interest. This responsibility requires you to act prudently and solely in the participants' interest. Here are some tips for managing fiduciary duty in your 401(k) plan.

Select and Monitor Service Providers Carefully

Selecting service providers for your 401(k) plan is critical. First, you must ensure that the chosen providers are qualified and have the expertise to manage the 401(k) plan. Monitoring service providers regularly is vital to ensure they are performing their duties properly and not engaging in conflicts of interest.

Evaluating multiple providers can help you avoid conflicts of interest. Consider putting together a committee and setting provider criteria. Some considerations include price, services, fiduciary support, experience, and the team.  

Establish Investment Policy Statement

An investment policy statement (IPS) is a written document that outlines the plan's investment objectives and guidelines. It helps provide structure to investment decisions. In addition, it helps ensure that the plan's investments are consistent with the participant's objectives and needs. 

Establishing an IPS can help you fulfill your fiduciary responsibility by ensuring the plan's assets are managed in the participants' best interest. An experienced retirement plan advisor can help you establish and monitor an IPS.

Monitor Plan Investments Regularly

Regularly monitoring the plan's assets can help you identify any underperforming investments or investments inconsistent with the plan's IPS. Consider utilizing the help of an investment co-fiduciary or investment manager to help monitor investments. You should also periodically review the fees associated with the plan's assets to ensure they are reasonable.

Fiduciary Calendar

There are a variety of tasks associated with plan governance. Having a process is essential. Refrain from assuming other service providers are taking care of plan requirements. Following a fiduciary calendar and regularly evaluating your plan governance process can help you fulfill your fiduciary responsibilities.  

Document Everything

Finally, it is essential to document everything related to the plan. For example, you should record minutes from meetings, investment reviews, and any other decisions related to the 401(k) plan. By documenting everything, you can demonstrate that you are fulfilling your fiduciary responsibilities and can provide evidence in case of any legal disputes.

Conclusion

Managing fiduciary responsibility in your 401(k) plan is critical to ensuring that the 401(k) plan is governed in the best interest of the participants. By carefully selecting and monitoring service providers, establishing an IPS, monitoring plan investments regularly, following a fiduciary calendar, and documenting everything, you can better fulfill your fiduciary responsibilities. This list is not exhaustive of ways to meet your fiduciary duties.