Q: What is the most important consideration regarding 401k investments?
A: A fundamental investment decision is whether 401k investments are controlled by the employer or participant-directed. Most 401k plans use participant-directed accounts. A pooled approach will require less recordkeeping and frequently use the services of seasoned investment professionals to produce returns which would be difficult for 401k plan participants to secure on their own. However, employees who contribute to the 401k plan may want to select their own 401k investments. In addition, if participant-directed investments are used, employer fiduciary responsibility for investment losses may be reduced by following Section 404(c) of the Internal Revenue Code.
Q: What must every employer consider regarding 401k investments?
A: The employer must establish an investment policy, determine investment options that are consistent with the policy, hire investment personnel to effectuate and monitor the investments and provide information to employees regarding the 401k investments.
Q: Which 401k investment options are available to the employer?
A: An employer can select from several categories, including bonds and equities. If the 401k service provider is a mutual fund or insurance company, it may only allow selecting its own funds. Using a third-party provider will usually permit a comfortable range of 401k investment options.
If you have 401k questions or need assistance, please complete our short form. We will reply promptly to concerns of employers and their 401k representatives. Or call us at 718-793-9885. Our web site home page contains additional useful information about 401k plans.