How can you improve your existing 401(k) plan?

The law states you are responsible for knowing all fees; ironically, 401(k) vendors are not legally obliged to disclose them to you.

The fiduciary's conduct is to be judged against a presumption of a high degree of knowledge. A trustee's lack of familiarity with investments is no excuse. [Marshall v. Glass/Metal Association (D. Hawaii, 1980)]

A fiduciary (trustee) under ERISA, in order to meet his responsibilities, must ensure the fees paid to plan providers and investment managers do not exceed those provided for in the investment manager's contract with the plan. The fiduciary must discern if the fees paid for services are reasonable, and this would be difficult if not impossible without a written service agreement to review.

Under ERISA, the fiduciary (trustee) is held to the so-called prudent expert rule even if he lacks the capabilities required to carry out his fiduciary responsibilities. Under these circumstances, he must engage experts to have the requisite skill, knowledge, and experience needed by the plan. [Donovan v. Mazzola, (9th Cir. 1983)]

A trustee's lack of familiarity with investments is no excuse. [Marshall v. Glass/Metal Association (D. Hawaii, 1980)]

Uniform Prudent Investors Act (UPIA) state:
Wasting beneficiaries’ money is imprudent. In devising and implementing strategies for the investment and management of trust assets, trustees are obliged to minimize costs.

Lowering your fees is the quickest way to improve performance of your investments and improve your plan, but can you name all fees?

How do you know if you are paying hidden fees?

Part of your responsibility as fiduciary is to identify all fees and determine if they are reasonable. If you cannot name them, how can you quantify and qualify them...which may constitute a prohibited transaction under ERISA 408 and a breach of your fiduciary duty.

Your biggest hurdle to fiduciary compliance may be your plan provider. The rules and laws favor the insurance and brokerage companies so they do not have to disclose all of the fees charged to your 401k plan and your employees BUT you are responsible for knowing what the fees are and whether they are excessive. Undisclosed and Higher fees lead to underperformance of investments which COMPOUND your fiduciary liability. You can improve your existing 401(k) plan by letting a fiduciary reveal the facts. You need a fiduciary because you cannot mitigate risks and account for all fees you do not know exist.

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