2In a perfect world, employers should see regular upgrades in the quality of their 401(k) plans services, as well as discounts to plan fees and expenses as competition in the 401(k) market increases.

However, because this isn't a perfect world, declines in plan investment while expenses and fees remain unchanged means that many plans have lost value -- which could pose a serious problem for you if you're a "fiduciary," involved in the administration or investment decisions of your company's plan.

ERISA defines the legal responsibility of a fiduciary as making plan decisions "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters in the conduct of an enterprise of a like character and with like aims."

To avoid the possibility of breaching your fiduciary duties, we'd recommend these guidelines:

  • Use outside experts (unless you have experience in plan administration).
  • Review the operations and documentation of the plan at least once a year.
  • Provide a comprehensive investment policy statement and encourage plan participants to question investment decisions.
  • Keep a close eye on plan investments.
  • Consider buying Fiduciary Liability insurance.

For more information on this key topic, please feel free to get in touch with our Employee Benefits professionals.

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