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Education and guidance. The consultants also agree that employee communications and education that is targeted to specific subgroups of participants based on plan participation, employee age, individual investment allocation or other factors are best-in-breed features.
Institutional pricing. Some of the best 401(k) plans tend to invest in funds that have what's called institutional pricing, Borland says. Most mutual funds come in many classes, with some classes having higher fees than others. Plans that use funds with institutional pricing typically have the lowest fees.
Managed accounts/investment advisory services. According to Levy, some plans now automatically -- or what is sometimes referred to as "passively" -- enroll participants in a 401(k) that gives them access to investment advice at a cost of around one-quarter to one-half of 1% of their 401(k) balance. That fee is much less than what companies typically charge when participants are not automatically enrolled in a plan, Levy says.
The advice is typically specific to the 401(k) but likely takes into account a participant's other assets, he says.
A strong governance structure. Watson's Arko says 401(k) plans with specific written guidelines and policies, continuing monitoring of plan vendors and internal employees and fiduciaries with plan responsibilities, and periodic performance and market assessments are viewed as best in breed as well.
Withdrawal limitations. Arko also says the best 401(k) plans have limited in-service withdrawal opportunities and limits on the number and frequency of plan loans (one or two outstanding at any one time) and absolutely no "401(k) credit card."
This story was reported and written by Robert Powell for MarketWatch.
Published Sept. 23, 2008
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