Questions for Decision Makers
Due Diligence for Retirement Plan Trustees and Investment Commmittees
The Firm
- Is the Investment Management Company registered as a Securities and Exchange
Commission Registered Investment Advisor (SEC RIA)?
- Does the advisor specialize in 401(k) plans?
- Is the Investment Management Company headquartered on the North
Coast?
- Does the Investment Management Company carry an ERISA (Employee Retirement
Income Security Act) Bond for qualified retirement money?
- Does the Investment Management Company carry Registered Investment Advisor
Errors & Omissions insurance?
- Is your primary contact at the Investment Management Company with a principal
of the firm?
- Will the Investment Management Company provide a representative client
list?
- Does the Investment Management Company have experience in working with
investment committees?
The Staff
- Will the Investment Management Company provide you with more than one advisor
to increase consistency of service?
- What is the staffing of the Investment Management Company?
- Does the Investment Management Company provide a designated, experienced
person to serve as an administrative liaison?
Fiduciary Compliance
- Is your advisor a Co-Fiduciary?
- Will your advisor acknowledge their Co-Fiduciary relationship with the
TTEEs in writing? ERISA Section 3(38)
- Will your advisor provide a written investment policy statement? An investment
policy statement must be established and should be in writing. ERISA Sections
402(a)(1), 402(b)(1)-(2), 404(A)(1)(D).
- Does the advisor provide an annual fiduciary TTEE meeting covering the
investments?
- Will the Investment Management Company provide a fee quote based on the
specifics of the sponsor’s plan size, asset allocation, etc.?
- Will the advisor provide a Fiduciary Compliance Notebook?
- Does the plan provider have the investment managers sign an investment
policy statement, which addresses style drift and complies with the TTEEs
Fiduciary Responsibility to monitor investments? ERISA Section 405(a).
- Does the advisor assist the TTEEs in the documentation process of their
fiduciary responsibilities?
- Does the plan provider provide annual enrollment/education meetings and
does the education follow the guidelines set by the Department of Labor’s
Interpretive Bulletin 96-1; Participant Investment Education; Final Rule?
- Does the plan sponsor monitor the performance of the investments and is
that process documented? What process and benchmarks are used to monitor
performance? Investment performance must be monitored. ERISA Section 405(a).
- Does the plan sponsor know the total cost of the investments? Is there
a process to monitor the investment expenses and is that process documented?
Investment expenses must be controlled. ERISA Section 404(a).
- Is there a process to monitor the asset allocation of the plan assets?
Important tool to measure the effectiveness of participant education.
- Is the Investment Management Company familiar with the Restatement of the
Law Third/Prudent Investor Rule? Will it incorporate it into its investment
strategy?
Investment Strategy
- Can the investment strategy be communicated in an understandable way?
- Are the investment options retail or institutional?
- Do the investment options have a front end or back end sales charge? An
institutional program will have no front end or back end sales charges.
- Does the Investment Manager understand the importance of asset allocation
and incorporate it fully into the portfolio?
- Does the Investment Manager have a significant relationship with investment
resources that provide benefits to the plan sponsor?
Participant Support
- Does your program have internet access and can participants make changes
on the internet?
- Is there an education component to the website?
- Is there a toll-free number that participants can call for operational
support?
- Is there a toll-free number for the participants to help them with the
investment portion of their plan?
- How often will statements be provided?
- Does your 401(k) program provide model portfolios?
If you’d like Premier’s answers to these questions, please
contact us.
