401k Plan Investment Checklist

401k plan investment options must be carefully assigned and monitored.

I. Choice of pooled or participant-directed investments. Some factors that should be considered are:

    1. Employer

      A. Is the employer comfortable with the fiduciary liability caused by a pooled approach?

      B. Will participant-directed accounts (in accordance with Section 404(c) of ERISA ) substantially reduce an employer's fiduciary concerns?

      C. Will 401k investment and administrative costs be significantly reduced using a pooled approach?

    2. Employees

      A. Do employees want to make their own investments?

      B. Will participation be substantially reduced if a pooled approach is used?

II. Selection of 401k investment service providers

    1. Should an investment manager or committee be appointed?

    2. For participant-directed accounts, should selections be limited to certain mutual (or other) funds offered by one organization?

    3. How should investments be chosen when they are pooled?

III. Investment costs

    1. Did the employer carefully analyze costs when the 401k plan was established? Was negotiation conducted?

    2. Did the employer attempt to reduce costs by the following methods?

      A. Negotiation. If the 401k plan has existed for some time, has the employer communicated to its investment providers that unit costs should decrease as plan assets increase?

      B. Changing investment providers. Have proper cost comparisons been made between the current and proposed providers?

      C. Shifting investment costs to employees. Has the effect of adverse employee reaction been considered?

IV. Communication to participants

    1. Have participants received adequate information to make proper investment decisions?

    2. Have investment charges levied against participant accounts in participant-directed 401k plans been properly explained?

401k Plan Further Assistance

Please describe your 401k questions on our short form. We will reply promptly to concerns of employers and their representatives. Or call us at 718-793-9885. Our web site homepage contains additional useful 401k information.


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