When the stock market goes down, so do 401(k) assets.
The result: employees look for someone to blame, and the fiduciaries of their 401(k) plan, which often include the employer, are the target.
While there is no way to make a company's 401(k) plan lawsuit-proof, the United States Department of Labor recommends some basic steps that companies can take to avoid liability when their employee's 401(k) assets go south:
- Review or have a consultant review fund performances periodically and consider replacing underperforming funds.
- Offer an investment education program for employees who participate in the 401(k) plan, but make sure you follow the guidelines set forth in the Pension Protection Act so you don't inadvertently assume fiduciary responsibility for the information provided by the consultants.
- Disclose all direct and indirect fees associated with the 401(k) plan and all investment choices. Most 401(k) plans do not disclose all fees.
- Enable employees to select mutual funds from more than one fund family and make sure low-fee funds are included in the choices.
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