A Step Beyond ERISA Section 404(c): Improving on the Participant-Directed 401(k) Investment Model

This study proposes an alternative approach to the participant-directed 401(k) investment model in order to allow fulfillment of the primary objective of a 401(k) plan. The proposal, the non-participant-directed 401(k) plan, helps satisfy two important objectives at once; increase the odds that the...

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Bibliographic Details
Published inJournal of pension benefits Vol. 12; no. 4; p. 5
Main Authors Chang, Jeffrey C, Simon, W Scott, Allen, Gary K
Format Journal Article
LanguageEnglish
Published New York Aspen Publishers, Inc 01.07.2005
Subjects
Cost control
Cost reduction
Deferred compensation
ERISA
Fiduciary responsibility
Investment advisors
Investments
Liability
Mutual funds
Profit sharing plans
Proposals
Retirement
Stock exchanges
Studies
Success
Trust companies
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Summary:This study proposes an alternative approach to the participant-directed 401(k) investment model in order to allow fulfillment of the primary objective of a 401(k) plan. The proposal, the non-participant-directed 401(k) plan, helps satisfy two important objectives at once; increase the odds that the retirement investment and savings needs of plan participants will be met and reduce the fiduciary responsibility of fiduciaries. The proposed non-participant-directed 401(k) plan, as noted, contemplates the appointment of professional investment advisors and money managers to invest plan assets. The proposal envisions a customized participant experience within the 401(k) environment that utilizes low-cost, broadly diversified model portfolio investment options, each of which is passively managed and appropriately tailored to a participant's individual circumstances. The proposal is offered against the backdrop of often unintentionally self-destructive participant investment behavior, most of which cannot be affected by any amount of investment education from whatever source, and the difficulties and uncertainties plan sponsors and fiduciaries experience in complying with the 404(c) rules.
ISSN:1069-4064