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What are the most common non-conformities and opportunities for improvement in 401(k) Plans Found in Fiduciary Assessments?

Fiduciary assessments are an evaluation of a plan's conformity to the 22 Prudent Fiduciary Practices, which are based on legislation, case law and regulatory opinion letters/bulletins. In conducting these assessments of literally 100's of retirement plans, especially 401(k), we have found a number of common non-conformites and opportunties for improvement. What do you think they are?

Mar 10, 2012 by Michael from Alpharetta, GA in  |  Flag
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4 votes
Mike Kane Level 15

One of the non-conformities is lack of quantitative thresholds or inadequate measurement standard criteria in the Investment Policy Statement.

Comment   |  Flag   |  Mar 11, 2012 from Alpharetta, GA

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James Holland Level 18

Agree with others no IPS, throw in no Fee Policy, No Conflict of Interest Policy, No Code of Ethics Policy, No Fiduciary Manual, no meeting minutes, No Fiduciary Liability Insurance to name a few

Comment   |  Flag   |  Mar 22, 2012 from Charlotte, NC

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I think the number one non-conformity amongst micro and small plans is not even having an Investment Policy Statement to govern investment selection by. My experience would suggest that following the lack of an IPS, all the following would be common oversights: [1 ] Lack of due diligence and supporting documentation in regularly screening investments for inclusion/exclusion in the lineup (after all, if you don’t have an IPS, what are you screening against?) [2] Lack of due diligence in fee benchmarking, [3] Lack of documentation supporting periodic (at minimum tri-annual) vendor assessments, [4] taking the 404(c) election, but failing to take the required steps necessary to support the election. [5] Etcetera, etcetera…

Comment   |  Flag   |  Mar 12, 2012 from East Dundee, IL

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I concur with David. If you have no precepts to follow then you make a mess of things. I also hold the Accredited Investment Fiduciary designation and I have found it invaluable. FI360 gives us the 22 global fiduciary precepts to follow. If you follow these steps you will build and maintain a wonderfully balance, low cost succesful retirement plan.

Comment   |  Flag   |  Mar 12, 2012 from Loveland, OH

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Lower fees, more transparency, more robust/frequent employee education, better investment lineups, more comparison shopping by the plan sponsor, easier enrollment process, better overall participant service?

Comment   |  Flag   |  Mar 11, 2012 from Port Washington, NY

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