Story corrected to clarify Securian/Minnesota Life relationship in last paragraph.

Companies, faced with meeting the Prudent Person Standard of Care for their 401(k) plans can struggle, often because the business owner is unfamiliar with the process.

Kent Peterson

“Very often employers hire or partner with experts who can help them meet the prudent person requirements,” said Kent Peterson, author of Best Practices for Retirement Plan Investment Fiduciaries, a free document available at SecurianRetirementCenter.com. “But that does not relieve them of their fiduciary responsibility. Implementing some fundamental best practices can help them stay on track.”

The federal Employee Retirement Income Security Act of 1974 (ERISA) not only requires the retirement plans to be run in the best interest of employees, but also that the employer manage the plan with “care, skill, prudence and diligence.”

“Managing a retirement plan for the exclusive benefit of the employees is complicated, even for those of us who have the expertise,” Peterson said in a statement. “Plan sponsors should try to use best practices and align themselves with partners that look out for the best interests of the employer and employees.”

Securian identified six best investment fiduciary practices for retirement plan sponsors.

They include:

• Maintaining an investment policy statement with clear goals and objectives for the plan.
• Meeting ERISA section 404(c) requirements when constructing an investment array so employees can create diversified portfolios of varying degrees of risk that meet their investment needs.
• Prudently selecting and monitoring a default investment that qualifies as a Qualified Default Investment Alternative (QDIA). A QDIA provides a  plan with relief from the fiduciary liability of investment outcomes for participants using the plan’s default investment option, according to Securian
• Avoiding proprietary fund requirements. Some investment firms bundle their investment options, forcing plan sponsors to include options that may not fit the plan’s investment policy, Securian officials said.
• Demanding fee transparency and revenue neutrality.
• Selecting an investment array that is appropriate for employees’ knowledge and skill levels, thus preventing employee investment decisions that can be harmful to their ability to meet their retirement objectives.

Securian Financial Group, the parent company of Minnesota Life Insurance Co., serves more than 9 million individuals, has nearly $690 billion of life insurance in force and $27 billion in assets under management.