5 Essential Items Necessary to Develop an Effective 401k Plan
1.
) Establish and maintain an active and engaged investment committee.
If you don't have a committee you need to establish one, a committee can be just two people, if you have a committee you must meet regularly and take notes on decisions made.
2.
) Develop and follow an investment process that governs the management of the plan What process do you have for selecting fund options for your plan and what process do you have for replacing funds.
If you don't have one establish one if you have one MAKE sure you are following it.
3.
) Create a menu of solid, well diversified investment options and monitor them regularly Selected funds that are distinctly different asset classes, just because you have 10 funds does not mean you have 10 different asset classes.
Provide enough different asset class to allow participants to develop a diversified portfolio.
Providing suggested allocations or portfolios that have a diversified mix is helpful Once the fund selection is establish you must monitor these funds versus their peers for fund performance and expenses at least annually 4.
) Have the investment committee monitored and control overall plan expenses regularly Know and understand ALL expenses related to running your 401k plan.
This would include all administrative, recordkeeping, mutual fund expenses, advisor fees, wrap fees, etc.
Any and all fees must be understood and compared to plans your size.
5.
) Hire unbiased fiduciary adviser to manage individual 401k accounts If you have someone listed on your plan assets as receiving compensation, be certain that the person that is on your account is providing services for the fee they are receiving.
Be certain that all plan participants are certain what amount is being deducted from their account for these services.
Get written declaration from the advisor if any that they are a fiduciary and have no conflict of interest in advising you on your plan or your plan participants.
) Establish and maintain an active and engaged investment committee.
If you don't have a committee you need to establish one, a committee can be just two people, if you have a committee you must meet regularly and take notes on decisions made.
2.
) Develop and follow an investment process that governs the management of the plan What process do you have for selecting fund options for your plan and what process do you have for replacing funds.
If you don't have one establish one if you have one MAKE sure you are following it.
3.
) Create a menu of solid, well diversified investment options and monitor them regularly Selected funds that are distinctly different asset classes, just because you have 10 funds does not mean you have 10 different asset classes.
Provide enough different asset class to allow participants to develop a diversified portfolio.
Providing suggested allocations or portfolios that have a diversified mix is helpful Once the fund selection is establish you must monitor these funds versus their peers for fund performance and expenses at least annually 4.
) Have the investment committee monitored and control overall plan expenses regularly Know and understand ALL expenses related to running your 401k plan.
This would include all administrative, recordkeeping, mutual fund expenses, advisor fees, wrap fees, etc.
Any and all fees must be understood and compared to plans your size.
5.
) Hire unbiased fiduciary adviser to manage individual 401k accounts If you have someone listed on your plan assets as receiving compensation, be certain that the person that is on your account is providing services for the fee they are receiving.
Be certain that all plan participants are certain what amount is being deducted from their account for these services.
Get written declaration from the advisor if any that they are a fiduciary and have no conflict of interest in advising you on your plan or your plan participants.
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