What puts a business at risk when it comes to its 401(k) administration?
Losses in any retirement account will create anxiety and may invite some form of scrutiny, especially when the losses are in the 20 to 30 percent range (typical of what’s currently being experienced). A loss of this magnitude is understandably painful, but even more so for those employees who are closer to retirement and sensitive to losses because of their investment timeline horizons. For the business owner/operator who maintains fiduciary oversight of a 401(k) plan, the fundamental question you must answer is this: Does the underlying performance of your plan drastically underperform the index/average? If it does or if there are ‘undue losses’ that may appear to result from mismanagement or neglect, those losses can cause employees to feel victimized and can open you up to lawsuits and litigation. What are some of the danger signs that indicate a plan may require attention? With smaller companies, having one provider that offers only that one provider’s funds is an obvious red flag.
