Hiring a Fiduciary and Other Best Practices for Your Company 401(k) Retirement Plan

By David Hoffmann CFP®, AIF®

401(k) Retirement Plans

Companies that offer employees a qualified retirement plan must recognize their responsibility to act in the best interests of their employees. Employers have an ongoing responsibility to monitor their 401(k) providers and investments to ensure they are providing a best-in-class plan with top notch investment options and reasonable expenses. In today’s ever-evolving retirement plan market, this requires confirming that employers are satisfying their fiduciary duties. For this reason, more and more employers are seeking providers with transparent fees and a robust menu of services that can easily and methodically be monitored and documented.

So how do you ensure that your retirement plan is not just another ‘roll out the plan and forget it’ type of plan?

To begin, there is a wide range of financial advice givers in the 401(k) market, including brokers, insurance agents, investment advisers, financial planners and even accounting firms. A major difference between many of them is their required standard of service. Many plan advisors are not required to adhere to a high standard when implementing retirement plans. Independent investment advisors such as D.B. Root, however, are subject to a fiduciary standard that requires us to act in the best interest of 401(k) plan participants first and foremost, along with the trustees on the plan. As such, independent advisors are generally paid a fee for advice given rather than commissions for transactions done. That fee can either be a flat dollar figure per year or an asset-based percentage per quarter, typically. This depends on the size of the plan. Larger plans generally pay flat fees; whereas, smaller plans will pay asset-based percentage fees.

There are several best practices that should be in place to make sure a company is meeting the fiduciary standard for employees. One extremely important practice is to make sure your plan’s providers and investments are overseen by an investment committee. With such regulatory scrutiny and the possibility of fiduciary liability exposure, this can be a sound risk management strategy, regardless of your plan’s size. The investment committee can consist of just a couple of people up to double digits, depending on the company. It is important to have representation for the different job classifications you have within the company. An investment committee has several responsibilities: developing an investment policy statement that spells out the parameters for what the committee does, reviewing and approving the platform and investments within the plan, establishing procedures for selecting and monitoring the investment options, verifying the manager’s performance, reviewing fees being charged, voting proxies, and documenting all decisions made for the plan. The investment advisor leads the charge on this to make sure it is implemented properly.

Another best practice, 401(k) education meetings, can be a significant benefit for employers and employees. It is important that employees understand the plan and the available investment options for them to be successful participants. Companies need to be providing education about the plan on an ongoing basis in order to fulfill their fiduciary responsibilities. We recommend semi-annual or annual (at a minimum) employee education sessions to our retirement plan clients.

A final best practice add-on that our firm provides is financial planning “Lunch n’ Learns” for many of our corporate clients. We come in and speak to employees regarding various financial topics during their lunch break. Helping employees to better manage their finances will make them less likely to experience financial difficulties – one of the major causes of reduced worker productivity and absenteeism. According to a 2016 Employee Financial Wellness Survey by Price Waterhouse Coopers*, nearly one in three employees report personal finances being a distraction at work, and 46% of those say they spend three or more hours a week dealing with these issues.

Best practices may only be as good as the capabilities of the firm managing your 401(k). An advisor following the fiduciary standard can help ensure that you are putting your money into products that will grow your future wealth, not theirs. So, whether you are an administrator of a plan or an employee, by performing some important due diligence to ensure best practices, you could end up with a superior plan.

Thanks for reading!


David Hoffmann is Managing Director of DBR Flagship Client Services at

D. B. Root & Company, a Pittsburgh-based wealth management firm.

If you would like to contact the author, David Hoffmann, please e-mail him at d.hoffmann@dbroot.com or call 412-227-2800.

This material has been provided for general, informational purposes only, represents only a summary of the topics discussed, and is not suitable for everyone. The information contained herein should not be construed as personalized investment advice or recommendations. Rather, they simply reflect the opinions and views of the author. D. B. Root does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice that is specific to your situation. There can be no assurance that any particular strategy or investment will prove profitable. This document contains information derived from third party sources. Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information derived from such sources, and take no responsibility therefore. This document contains certain forward-looking statements signaled by words such as "anticipate," "expect", or "believe" that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. As such, there is no guarantee that the expectations, beliefs, views and opinions expressed in this document will come to pass. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

*2017 PwC financial well-being retirement survey


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