Two recent court rulings may make you want to double-check.

How often do retirement plan sponsors check up on 401(k)s? Some small businesses may not be prepared to benchmark processes and continuously look for and reject unacceptable investments.

Do you have high-quality investment choices in your plan? While larger plan sponsors have more “pull” with plan providers, this does not relegate a small company sponsoring a 401(k) to a substandard investment selection. Employees are smart and will ask questions sooner or later. “Why does this 401(k) have only one bond fund?” “Where are the target-date funds?” “I went to Morningstar, and some of these funds have so-so ratings.” Questions and comments like these are reasonable and surface when a plan’s roster of investments is too short.

Are your plan’s investment fees reasonable? Employees can deduce this without checking up on the Form 5500 you file — there are websites that offer some general information as to what is and what is not acceptable. Most retirement savers read up on this with time, and most know (or will know) that a plan with administrative fees pushing 1% is less than ideal.

Are you using institutional share classes in your 401(k)? This was the key issue brought to light by the plan participants in Tibble v. Edison International. The Supreme Court noted that while Edison International’s investment committee and third-party advisors had offered a variety of mutual funds, the plans offered higher-priced options and didn’t offer plans that were similar, yet of a lower cost. The court ruled that “a trustee has a continuing duty—separate and apart from the duty to exercise prudence in selling investments at the outset—to monitor, and remove imprudent, trust investments. So long as a plaintiff’s claim alleging breach of the continuing duty of prudence occurred within six years of suit, the claim is timely.”

Institutional share classes commonly have lower fees than retail share classes. To some observers, the difference in fees may seem trivial — but the impact on retirement savings over time may be significant.

When was the last time you reviewed your 401(k)-fund selection & share class? Was it a few years ago? Has it been longer than that? Why not review this today? Call in a financial professional to help you review your plan’s investment offering and investment fees.

REMEMBER: The Moneywise team is here and always accessible to help guide you through the tangled web of retirement plans, changes to retirement laws and assisting with participant outcomes. We specialize in partnering with business owners to determine what type of plan makes the most sense for their organization and implement these strategies so they don’t have to. If you have any questions or would like more information on how we can help you and your business or a friend that you think might benefit from our services, please call the Moneywise Wealth Management office: 661.847.1000 or directly email our business services + 401k specialist: justin@moneywiseguys.com

BE SMART. BE SAFE. BE MONEYWISE.

If your business either has, or is looking into, a 401k or similar plan, contact us at the Moneywise Wealth Management office at (661) 847-1000 or email justin@moneywiseguys.com We are experts in the field with years of experience in creating customized and unique retirement plans and platforms. We get to the heart of what makes your company unique, and we work to build a plan that is customized specifically for your demographics and goals.

*Disclosure* The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for any individual. To determine what is appropriate for you, consult a qualified professional.

2019 Marketing Pro Content + Citations:

1 – lexology.com/library/detail.aspx?g=c083ae5f-1892-4b17-9a31-6d60f27ee712(4/3/19)